An argument for euro gains from here
Today's German industrial production data was bad. Recession bad.
Production fell 1.9% in November compared to +0.3% expected. On top of that, the October reading was revised down to -0.8% from -0.5%. Compared to a year ago, production is down 4.7%.
SocGen argues today that today's data "leaves Q4 GDP growth looking close to zero" in Germany.
As bad as that sounds, the euro shook it off. It's trading down 36 pips on the day to 1.1436 and all the declines were before that data. I often argue that something that can't fall on bad news probably won't fall at all.
"The narrowing in the Treasury/Bund yield differential is doing stalwart work in defending the downside for EUR/USD now and my confidence we've seen the lows for this cycle is growing., Sadly, that's not the same as believing that there's a brighter future for the euro, in the absence of better growth and higher Bund yields," SocGen writes.
At the same time, they argue that there's no rush to buy the euro. It could be stuck here for some time and may still decline on crosses like EUR/AUD and EUR/JPY.
"We've seen the lows, but lack a catalyst to rise," they write.
It's a compelling argument.
Here's another case for euro strength.
