Germany’s Trade Surplus Widens to €18.7 billion on Imports Slide

Highlights

• It is a busy Thursday session on the European economic calendar, with German trade data and service sector PMIs in focus.
• Germany’s trade surplus widened to €18.7 billion on a slide in imports, signaling weak demand.
• Later today, US jobless claims and the all-important ISM Non-Manufacturing PMI will drive market risk sentiment.

It is a busy Thursday on the European economic calendar, with service PMIs for Italy and Spain and finalized PMIs for France, Germany, and the Eurozone in focus.

However, German trade data drew interest going into the European session. With the German economy facing a weak global demand environment, today’s numbers would give the markets a better sense of how the economy is performing.

In June, the German trade surplus widened from €14.4 billion to €18.7 billion. Economists forecast a trade surplus of €15.0 billion.

According to Destatis,

• Exports increased by 0.1% in June to €131.3 billion.
• Imports slid by 3.4% in June to €112.6 billion.

Trade with EU countries

• German exports to EU countries increased by 1.3%, while imports from EU countries fell by 3.1%.
• The value of goods exported to euro area countries increased by 1.8%, while imports slid by 4.1%.

Trade with non-EU countries

• Exports of goods to third countries declined by 1.1%, with imports down 3.7%.
• Exports to the US fell by 0.2%, while exports to China slumped by 5.9%.
• In contrast, imports from China surged by 5.3%, while imports from the US declined by 1.2%.

While the trade surplus widened, the modest rise in total exports and slide in total imports painted a grim demand picture.

EUR/USD Reaction to German Trade Figures

Before the German trade data, the EUR/USD rose to a pre-stat high of $1.09494 before falling to a low of $1.09193.

However, in response to the trade data, the EUR/USD fell to a post-stat low of $1.09346 before rising to a high of $1.09434.

This morning, the EUR/USD was up 0.02% to $1.09416.

Next Up

After bearish manufacturing sector PMIs from Tuesday, the European private sector will be in focus for a second time this week. Service sector PMIs from Spain and Italy and finalized numbers for France, Germany, and the Eurozone will move the dial.

Weaker service sector activity across Italy and Spain and a downward revision to the Eurozone services PMI would fuel recessionary jitters. According to the flash survey, the Eurozone services PMI fell from 52.0 to 51.1 in July.

ECB Executive Board Member Fabio Panetta is on the calendar to speak today. However, investors should monitor the news wires for chatter with the media.

The US Session

US initial jobless claims and the all-important ISM Non-Manufacturing PMI will be in focus. Economists forecast the ISM Non-Manufacturing PMI to fall from 53.9 to 53.0. However, investors must consider the sub-components. These include employment, new business, and prices.

Other stats include finalized Markit survey-based service PMI, nonfarm productivity, unit labor costs, and factory orders. However, these stats should play second fiddle to the initial jobless claims and ISM survey-based numbers.