Fundamental Comment

Euro extends drop after weak French GDP


The euro extended its drop for a third straight session on Friday, set for its second weekly decline in a row, after the release of weak growth figures from France.

The EURUSD pair hit a bottom of 1.2064, the lowest level in three months, resuming its bearishness since touching a peak of 1.2413 on April 17.

Data released today showed the French economy signaled a slowdown in the pace of growth to 0.3 percent in the first quarter this year from 0.7 percent expansion in the previous three months. That was lower than market anticipations of 0.4 percent growth.

In Spain, the flash quarterly GDP showed a 0.7 percent growth, similar to both prior and expected readings.

The data added to worries about the growth and inflation outlook in the euro area, which would prompt policymakers to hold stimulus for longer period.

In the medium-term, concerns remain, which may keep inflation below 2% during this period, ECB President Mario Draghi said on Thursday.

The ECB pledged to hold its monthly bond purchases programme until September this year or beyond ‘if necessary.’

It seems that the ease in geopolitical and trade tensions have turned investors’ attention to the clear divergence between the ECB and the Federal Reserve.

While the Fed is preparing for more two interest rate hikes later this year, the ECB will probably hold its QE program beyond September.

Later in the day, eyes will focus on U.S. annualized first-quarter GDP, which is predicted to signal an ease in expansion from 2.9 percent to 2.0 percent.

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