For the first time since the 1990s, Germany is facing a trade deficit as figures announced this morning show a deficit of -$1.0bn for May. Rising costs with inflation and war in Ukraine saw price of food and energy rise, with the energy bill multiplied by 6 since 2020. However, despite rising costs, expectations saw the trade balance forecasted at $2.7bn, a fall from the $3.0bn figure for April. Official figures therefore show the German economy underperformed in May. G7 leaders announced last week their intention of putting a price cap on Russian energy as several EU members remain dependent on Russian energy, but industry analysts remain pessimistic about the likelihood of a price cap.
Market activity will be lightened today with the Independence Day holiday in the United States. This morning, the US dollar index stood at 105.55, not far from the high of 105.790 hit last month, a 20-year high. The Atlanta Federal Reserve's long-awaited forecast for GDP slipped to minus 2.1% year-on-year for the second quarter, after official data from the government last week around -1.6%, meaning the country was already technically in a recession. The ISM manufacturing employment showed that the manufacturing industry was contracting as well, announcing bad results for this week’s non-farm payrolls due Friday. PMIs remain in expansion, although lower than expected with the manufacturing PMI at 53.0 instead of the 54.9 forecasted.
Cable saw the dollar strengthen Friday. GBPUSD opened at 1.2177 and closed at 1.2094.
GBPEUR saw the pound lose some ground with disappointing manufacturing PMI results. The pair opened at 1.1615 and closed at 1.1595.
EURUSD saw the Euro lose ground once again on the dollar. The EURUSD pair opened at 1.0481 and closed at 1.0428.
