EUR was locked around the level of 1.1735 to the US dollar in the yesterday European tradinh session. It seems that the market ignored the Germany’s GDP data which was released recently.
The Private consumption in that Eurozone's largest economy has led to a rapid recovery. However, Germany's recovery was also boosted by fiscal stimulus so far.
That could be a burden on the next period of government. Meanwhile ,the export and investment are still relatively sluggish. The Germany’s GDP grows by 1.6% quarter-over-quarter.
That is happened in the II/2021 quarter. This achievement flips the -1.8 percent in the recent period. That Was also higher than the consensus expectation which is planned in 1.5%.
The State Spending Dampens the Pandemic Crisis
The Annual economic growth reached 9.8 percent, clearly exceeding the consensus estimate of 9.6 percent (Year-on-Year).
State spending is dampening the impact of the pandemic crisis on the economy. However, the country's spending was funded with new public loans that reached EUR80.9 billion in the first half of 2021.
That equates to a public sector deficit of 4.7 percent of GDP. That became its highest record in 26 years. Carsten Bearskin from the ING bank called it as the negative side from the quick economy recovery.
He stated that the stimulus must be able to lift the economy to be back on the pre-crisis type before the end of 2021. However, that will create the heavy weight for the new government.
Germany’s Economy Rebound is Weaker
The government above is those who are currently winning the federal election next month. In a different note, Brzeski revealed the Germany's economic rebound condition.
That was weaker than other Eurozone countries as the manufacturing sector was hit by supply chain problems. He considered problems in the supply chain to be the biggest risk.
It is especially to the German economic outloo. That was even riskier than the impact of COVID. One of the economic growth supporter factors is the private consumption.
That is threatened by the inflation increase potential to become 4 percent or even more. Meanwhile, the New Zealand dollar became the forex market winning on Tuesday.
The NZD has a Significant Increase
Based on the data, the NZD recorded the significant increase of more than 0.7% to the level of 0.6940 to the US dollar. The NZD/USD rebound was initially happened because of the profit taking action.
That action happened on the beginning of the week following the global commodity price increase and the hawkish comments. That comment was from the New Zealand central bank member.
The RBNZ Assistant Governor Christian Hawkesby said that the central bank's decision is not to raise the interest rates last week. Basically, it was not due to economic risks.
However, that is because of the mere communication challenges. RBNZ officials were actually considering raising interest rates by as much as 50 basis points at the time.
Some Important Lessons from Lockdown
They published the documents that can easily follow the interest week Last week. The cancelled announcement was not caused by COVID-19, but everything is more about timing.
He added that there are a number of important lessons from last year's experience. The first lockdown at the beginning of the pandemic did not result in deflation and unemployment.
That also didn’t make a massive recession as previously feared. The demand side of the economy proved to be "much more resilient" than the expectations so far. That is the truth.
Only the supply side is experiencing the problems "more prolonged than our expectations" and that is what is giving birth to the current inflationary pressures.
In turn, the pressure is likely to boost inflation expectations that support the prospect of a rate hike. The new pandemic wave in New Zealand isn’t a game changer.
