The euro zone is showing signs of modest growth, but that economic momentum is not exactly what it seems. The growth rate for Q2 stood at 0.3 percent, or an annualized rate of 1.6 percent. This is almost exactly what the experts had predicted with the EU, but it is a number fraught with hidden problems.
Growth is definitely a good thing, but what we are seeing happen in the EU isn’t exactly uniform growth, but, in fact, it is a rather lopsided type of growth with a couple countries doing the bulk of the work. Italy performed especially poorly in the latest batch of data, for example. Germany was really the star of the data release, doubling economists’ predictions on how much growth would occur, settling in at an annualized rate of 3.1 percent growth. Germany is the largest economy in the euro zone, and even with this large amount of firepower, it was barely enough to give the economy as a whole a positive number. France, the euro zone’s second largest economy, remained virtually the same.
As a trader, economic reports like this carry a large impact. They have the ability to swing short term movement within both indices and currency pairs, and they lay out a framework for what kind of long term growth (or losses) is most likely to happen. Whether you trade in the stock market, the Forex market, or with binary options, there is plenty of opportunity to capitalize on this data. Depending on what your goals are and what kind of capital you have at your disposal, any or all of these trading techniques can be profitable for you. Trading the news is always a vital component of any trader’s ability, but just be sure that you are able to gauge the public’s reaction accurately—even if it doesn’t necessarily make sense to you based upon your own analysis. Markets are typically rational over the long term, but not always over the short term. Long term growth is good, remember, but these numbers have a lot of hidden pitfalls within them, and there’s a strong chance that this data will be seen as a negative thing.
For an individual trader, the best policy here seems to be to pick apart the data and attack piece of it here and there. For example, rather than focusing on what the euro is going to do, look at what the major German indices are going to. The euro is the world’s second most highly traded currency, and is often fairly predictable after economic events, but in this case, a lot of the news is uncertain, and you would also have to compare the euro against another currency. Instead, the German indices give you a much clearer projected outcome. The economy is strong, and is likely to stay that way.
A lot of this uncertainty has been blamed on the so-called Brexit, but these problems were present long before the June referendum for England to leave the EU. In fact, these problems were one of the main reasons why the vote went through in the first place. Italy’s economy has been lagging behind the bulk of the EU for years, although Greece has taken away much of the spotlight from Italy in this regard. However, Italy’s underperformance should not be a surprise to anyone. It’s one of the root reasons why they joined the EU, and it remains one of the most persistent problems that the euro zone is facing. With one less leader in the mix, how the EU handles problems like this will be of great importance to its survival as a group.