The Eurozone economy shrinks slightly. However, the Euro is rising. Kit Juckes, Chief Global FX Strategist at Société Générale, analyzes EUR outlook.
Even the UK is doing a bit better than the Eurozone and Japan is catching up
Today’s release of Eurozone GDP data, and the (lack of) market reaction, may tell us something about how hard it is for the Euro to fall all that far from here.
Eurozone GDP fell by 0.1% in Q3, which leaves it up 0.1% compared to Q3 2022. The US Q3 GDP increase was 1.2%, QoQ, 2.9% YoY. Even the UK is, for now, doing a bit better than the Eurozone and Japan is catching up. That this news hasn’t hurt the Euro, however, is a reminder that a lack of growth is priced in already. That doesn’t mean the Euro is safe, however.
The risk is that we continue to see (as has been the case for the last few weeks) ECB cut expectations grow for mid-2023, while Fed expectations stick to the ‘high for longer’ mantra. That can still take EUR/USD closer to parity.
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