The monthly goods trade report for the euro area released today suggested that the trade performance once again provided little if any support. The adjusted trade surplus dropped for the third straight month to EUR 16.7 billion, the lowest level since the beginning of 2017 to leave the surplus over the quarter as a whole as its smallest since the third quarter of 2014. In terms of values, exports rose for the fourth straight month in June and by 1.6 percent sequentially to leave them up 1 percent quarter-on-quarter in the second quarter. But with import growth even stronger, 1.8 percent month-on-month and 2.2 percent quarter-on-quarter, today’s release implies that when the national accounts expenditure breakdown is published next month it will affirm that net trade deducted from the economic growth in the second quarter for the second straight quarter, noted Daiwa Capital Market Research report.
Meanwhile, exports rose nearly 7 percent year-on-year in June. Euro area’s exports to China rose 4.5 percent, while to Turkey it decelerated significantly to 2.7 percent. Given the recent rise in lira crisis, a further weakening in Turkish demand is expected. But since Turkey accounts for 3 percent of extra-euro area exports, the direct impact of the lira crisis on the euro area’s trade performance is likely to be small.
“But looking ahead, concerns about emerging stresses in the wider community of emerging market countries, including China, persist. And with surveys suggesting a further weakening in new export order growth at the start of Q3, we do not anticipate any marked acceleration in export growth over the near term”, added Daiwa Capital Market Research.
At 21:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was neutral at 42.8417, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 33.4564. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex
