Ritorna alle Analisi

Germany Enters Technical Recession

The latest data from Germany indicates that their economy contracted 0.3% during the first quarter of 2023. Given that this follows a contraction of 0.5% seen over Q4 2022, Europe’s largest economy is now in a technical recession.

The contraction comes as household consumption fell by over 1% as the rising cost of living squeezed household budgets – particularly for new cars given the annulment of some government grants. The fall in German industrial production also saw its largest drop in over a year for the month of March, due to weak performance in the automotive sector. The first three months of the year also saw government spending fall close to 5% as energy subsidies subsided. Concerns over stagflation will be circulating through Frankfurt and Berlin, given that inflation is currently at 7.2% and growth remains negative.

Changing Lanes in Global Car Production

As alluded to above, German car production has been under pressure with the number of cars produced falling from 434, 962 units in March to 321,000 Units in April. This comes as the tides turn in car production around the world, with China recently overtaking Japan as the world’s top car exporter. (And just last year, China overtook Germany as the world’s second largest car exporter). Last week, official figures from Beijing indicated that China exported 1.07 million vehicles over the course of Q1, a gargantuan 58% increase from Q1 2022. Much of this rise in production is thought to have come from a rise in demand for electric cars going to Russia, a country whose car industry has been hit by Western sanctions. As Reuters notes: “Several Russian auto makers suspended production for periods of last year as the industry struggled to source parts and establish new supply chains following the imposition of the sanctions over Moscow’s military actions in Ukraine.”

China has seen the demand for new EV’s rise significantly as the world’s second largest economy tries to decarbonise areas of its economy. Demand for these cars abroad has also lifted production, and Tesla have been amongst some of the big names to invest in China, having built a manufacturing plant in Shanghai which exports cars to places such as Europe and Japan.

Debt Ceiling Concerns Raised

With the world’s largest economy being just days away from the prospect of X-date, tensions on Capitol Hill are growing. As looked at earlier this week, X-date the date which denotes the date at which the US will have breached their debt ceiling and given outstanding obligations, would be in technical default. While President Joe Biden and House Speaker, Kevin McCarthy have held “productive” discussions given that no agreement has been reached, analysts are raising their expectations of X-date being realised. For example, Michael Feroli, JPMorgan’s chief US economist said that “we still think the most likely outcome is a deal signed into law before the X-date, though we see the odds of passing that date without an increase in the ceiling at around 25% and rising”. With such concerns rising, Fitch Ratings have warned that the US’ AAA rating is under threat due heightened uncertainty over a deal being reached.

Fed Minutes

With money markets currently pricing in around a 30% change of the Fed raising rates by a further 25bps, the release of the FOMC’s minutes has illuminated the split amongst policy makers. For example, various FOMC committee members evidently favour a June pause with the minutes stating that “several participants noted that if the economy evolved along the lines of their current outlooks, then further policy firming after this meeting may not be necessary”. Meanwhile, the minutes also indicated that “many participants focused on the need to retain optionality after this meeting” and thus their view on whether to raise rates or pause will be driven by recent data. As such, all eyes are on the Fed’s interest rate decision on 14 June and whether they will pause or raise their hiking cycle, where the base interest rate stands at 5.25%.

Ready to talk FX?

Get in touch with one of our friendly and knowledgeable experts to see how FX strategy can drive commercial impact in your business.


Analisi di mercato

Find out how we have helped our clients meet their hedging requirements.

Da Giugno si comincia

In UE, in assenza di notizie rilevanti o in controtendenza, il policymaker Kazaks afferma come il taglio dei tassi a giugno da parte della BCE sia altamente probabile...

Volano oro e rame

In una settimana con un inizio soft a livello di calendario economico, le attenzioni virano verso le questioni geopolitiche...

Acqua fresca sul fuoco dell’inflazione USA

Eurostat ha pubblicato la seconda stima dei dati preliminari del PIL del Q1: la crescita trimestrale e annualizzata è stata in linea con il consenso...

Powell resta di stucco

L’inflazione nelle terre tedesche e spagnole continua ad essere in linea con le aspettative, segnando una crescita, rispettivamente, del 2.2% e dello 0.7%...

Biglietto Verde al bivio

Settimana di attesa per la valuta comune del Continente Blu: oltre all’indice ZEW in uscita oggi, gli occhi saranno puntati sul PIL, sulla disoccupazione e sulla produzione industriale, in uscita domani, e sull’indice dei prezzi al consumo che saranno pubblicati venerdì...

Le politiche monetarie divergono

I responsabili della BCE sono divisi sull'estensione del ciclo di tagli dei tassi dopo la riunione di giugno...

Falchi e colombe volano sulla BoE

Il responsabile delle politiche della Banca Centrale Europea, Robert Holzmann, dà il via alla sessione europea affermando di non intravedere motivi per ridurre i tassi di interesse di riferimento in maniera troppo repentina o veloce...

Sale la voglia di tagli nella BCE

I dati statunitensi sul mercato del lavoro, più deboli del previsto hanno aumentato le probabilità di un taglio dei tassi a settembre da parte della Federal Reserve...

Per saperne di più sulle nostre soluzioni Forex intelligenti