Eurozone Economic Recovery Begins to Pick Up Momentum

Azeez Mustapha

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According to forecasts by analysts at Wells Fargo, the eurozone economy will contract by 8.3% in 2020. They expect a 4% GDP growth in 2021. They revised up their forecast for global growth by one-tenth of a percentage point for 2020 and three tenths for 2021, to -3.7%, and 4.7%, respectively.

“The level of economic activity remains depressed in most major economies, but a gradual recovery continues to take hold. Through the first six months of the year, the average level of Eurozone retail sales is “only” down 4.2%. In July, the Eurozone PMIs for manufacturing and services rose to 51.8 and 54.7, respectively. With both indices now firmly above 50, the pace of economic recovery in the Eurozone appears to be gathering momentum.”

“On net, a downward revision to Eurozone real GDP growth in 2020 has been more than offset by upward revisions to our expectations for 2021.”

“We do not anticipate any further easing from the ECB. Policymakers have thus far eschewed a deeper foray into negative rates, and we believe the magnitude and pace of asset purchases are sufficient at this time.”

Markets Returns Toward Risk-On Mode
Asian markets are broadly higher today after the strong closure of US stock indices. The DOW is finally catching up with a powerful breakout from the June high, while the S&P 500 is approaching an all-time high. Investors welcomed the news of a drop in coronavirus-related hospitalizations in New York, California, and Texas. The sanctions trade between the US and China was largely non-existent. The yen and dollar are under selling pressure again, together with the Swiss franc. Commodity currencies tend to be stronger, with the Australian dollar leading the way.

Technically speaking, the Hong Kong HSI appears to have withstood the political turmoil well, posting a notable 2.3% gain at the time of writing. Immediate channel support appears to be well defended and, as confirmation, look again at resistance at 25201. This will temporarily reduce the risk of risk aversion outside of Asia. Attention could be drawn to near-term support for the dollar, which indicates a renewed sell-off, particularly against commodity currencies. The levels include 0.7243 resistance for AUD/USD, 0.6715 resistance for NZD/USD, and 1.3233 support for USD/CAD.

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Azeez Mustapha

Azeez Mustapha is a trading professional, currency analyst, signals strategist, and funds manager with over ten years of experience within the financial field. As a blogger and finance author, he helps investors understand complex financial concepts, improve their investing skills, and learn how to manage their money.

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