German GDP overview
German gross domestic product (GDP) due at 06:00 GMT is expected to show the economy contracted 0.1% quarter-on-quarter in April to June period, having expanded by 0.4% in the first quarter.
The annualized GDP is forecasted to print at -0.3%, down from the previous quarter's reading of 0.6%.
German bond market is pointing to a recession
The entire German yield curve has entered the negative territory for the first time on record. Put simply, German government bonds are offering negative returns at both short and end long end of the curve.
Further, the yield curve has inverted with the 10-year yield trading below the 3-month yield. Curve inversion is widely considered a sign of recession.
So, a negative GDP print won't be a surprise but may end up strengthening the bearish pressures around the EUR as the key figure is scheduled for release a day after the forward-looking ZEW surveys pointed to a significant deterioration in the outlook for the German economy.
Notably, at -44.1, the ZEW Economic Sentiment Index for August was the worst figure since May 2010.
With the forward-looking indicators painting a gloomy picture due to the recent escalation of trade tension, the path of least resistance for the EUR appears to be on the downside.
On technical charts, the pair is looking heavy, having faced rejection above 1.1220 in the previous six trading days and could drop to 1.11 on weak German GDP
About German GDP
The Gross Domestic Product released by the Statistisches Bundesamt Deutschland is a measure of the total value of all goods and services produced by Germany. The GDP is considered as a broad measure of the German economic activity and health. A high reading or a better than expected number has a positive effect on the EUR, while a falling trend is seen as negative (or bearish).
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