GER30 Cautious as German GDP Contracted in 2023
GER30 Analysis
The German economy contracted by 0.3% in 2023 according to today's data and largely in line with expectations. That is the first annual contraction since the Covid-19 pandemic broke out (2020) and a far cry from the previous year's 1.8% growth. Higher interest rates took their toll as the European Central Bank has delivered a massive amount of tightening in order to bring down inflation.
Having made substantial progress towards its 2% mandate and given the weak economic activity, the ECB has pointed to peak rates. This helped GER30 resume its rally in Q3, testing the 17,000 mark for the first time in history. With markets expecting a policy pivot this year, the index has the ability to push forward. Mr Villeroy alluded to that last week, noting that 2024 "should be the year should be the year of our first interest rate cuts" [1]
However, markets may be overly optimistic around the timing and extent of the shift. Inflation is still well above 2%. Ms Lagarde spoke of prolonged restrictive stance and refused to embrace lower rates in her December press conference [2], while Mr Lane said "it's too early" for such moves, speaking on Corriere della Sera over the weekend. [3]
GER30 is constrained after December's record highs and faces some pressure today. It is exposed to the 23.6% Fibonacci of the last leg up and breach which could spark further losses to the 38.2% level. However, the downside appears well protected and strong catalyst would be needed for deeper correction.
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
References
| Retrieved 15 Jan 2024 https://www.banque-france.fr/en/governors-interventions/new-year-wishes-2024 | |
| Retrieved 15 Jan 2024 https://www.ecb.europa.eu/press/pressconf/2023/html/ecb.is231214~df8627de60.en.html | |
| Retrieved 04 May 2024 https://www.ecb.europa.eu/press/inter/date/2024/html/ecb.in240113~63455a0f8c.en.html |
Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.