Ole Hansen
Saxo Bank’s head of commodity strategy Ole Hansen considers the implications of pledges by Saudi Arabia and Russia to raise oil production despite the likes of Iran and Venezuela not backing the move.
Article / 07 June 2016 at 5:04 GMT

3 Numbers: Eurozone GDP revision to hold at 0.5%

editor/analyst /
United States
  • Economists expect Germany’s industrial output in April to rebound
  • Revised Q1 GDP data for Eurozone on track to remain steady at a 0.5% increase
  • Yen strength poised to keep USDJPY sliding until – or if – the BoJ intervenes

By James Picerno

Tuesday’s a busy day for economic news, including the monthly update on German industrial production for April. We’ll also see a revised first-quarter estimate for Eurozone GDP data. Meanwhile, keep an eye on USDJPY, which shows few signs that the year-to-date slide is about to end.

 The consensus for the Eurozone's revised Q1 GDP data is for it to hold at 0.5%. Photo: iStock

Germany: Industrial Production (0600 GMT) Factory orders in April were surprisingly weak for Europe’s main economy. The 1.3% monthly decline was well below the consensus forecast.

One reason the red ink caught the crowd offguard: the upbeat survey data for the manufacturing sector. Markit’s purchasing managers' index rose to a four-month high in May, implying that the sector’s fortunes are improving. Although growth is still modest, Markit noted that production has been accelerating lately in Germany’s manufacturing sector.

But there was no sign of a firming trend in yesterday’s release on factory orders at the start of the second quarter. Is a repeat performance due for today's numbers on industrial activity? No, according to expectations from dismal scientists. Economists are projecting that industrial output will bounce back in April after a steep decline in March.’s consensus forecast calls for a 0.6% monthly gain in production, which would mark the first month-on-month increase since January.

Some analysts are looking for even stronger growth for today’s industrial report. Commerzbank, for instance, is projecting that output will jump 1.5% in April. If that outlook holds, the news will overwhelm worries related to yesterday’s disappointing data on factory orders.

Eurozone GDP (0900 GMT) The OECD’s new outlook for Eurozone GDP growth continues to project a 1.6% rise for this year, which is a touch higher than the published year-on-year data via Eurostat through this year’s first quarter. But there are hints that growth estimates may be headed for downgrades in the weeks ahead.’s current Eurozone forecast for Q2 GDP growth is a weak 0.22%. As recently as late April, the best guesstimate from this source was a substantially higher 0.40%. Separately, the Bank of Italy’s Euro-Coin Indicator, a monthly estimate of Eurozone GDP, ticked down to a weak 0.26% quarterly pace for May.

Survey data is also pointing to slower growth when the official Q2 GDP report is published in late July. Markit’s Eurozone Composite PMI numbers for May imply a 0.3% rise in GDP for the April-through-June period vs. the previous quarter. As such, the PMI profile is “suggesting the growth spurt seen at the start of the year will prove frustratingly short-lived”, said Markit’s chief economist late last week.

Today’s revised Q1 GDP data will provide fresh context for evaluating the recent downgrades for Q2 forecasts.’s consensus estimate sees Q1 growth holding at the 0.5% rate, unchanged from the previous estimate. A downside surprise, however, will refocus attention on the growing number of forecasts that see softer growth in Q2.  

USDJPY The sharp slowdown in US employment growth in May delivered a harsh blow for traders expecting that the Japanese yen was finally poised to fall against the US dollar. Before Friday’s update on US payrolls, there was chatter that a bullish run for the yen against the greenback this year was due to reverse. But the prospect of weaker US growth has thrown cold water on the idea, at least for the moment.

But if there’s a renewed appetite for buying the yen and selling the dollar, maybe that will lay the foundation for a reversal down the road by spurring the Bank of Japan to intervene. “We think the BoJ is going to ease in October. But the BoJ is very nervous about a strong yen and it could take actions earlier,” the chief FX strategist at Bank of Tokyo-Mitsubishi UFJ told Reuters yesterday.

Meanwhile, the technical profile of USDJPY still points to a stronger yen (i.e., a lower USDJPY). Although USDJPY rallied sharply late last month, briefly rising above its 100-day moving average for the first time since February (based on daily data), the bounce was short-lived. As of yesterday (June 6), USDJPY was again well below its 50-, 100-, and 200-day moving averages, signalling that gravity was still a force to be reckoned with.

Today’s revised data for Japan’s GDP in Q1 (GMT 2350) may trigger a new wave of yen strength. Analysts are looking for an uptick in growth to a 0.5% quarterly change vs. 0.4% in the current estimate, according to’s consensus forecast. If the pace of GDP growth ticks up, ActionForex advised on Monday that USDJPY could “move closer to the 105 level, which has held in support since October 2014.”

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– Edited by Gayle Bryant

James Picerno is a macro analyst/editor at Follow James or post your comment below to engage with Saxo Bank's social trading platform.


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