German goods exports rises sequentially in May, exports outlook looks highly uncertain

In line with German industrial production figures for May, the trade data appeared widely encouraging. The value of goods exports rose 1.8 percent sequentially, while imports grew just 0.7 percent sequentially. The trade balance rebounded from EUR 19 billion, a level last seen just at the beginning of last year, to EUR 20.3 billion, widely consistent with the average of the past couple of years.

However, looking at the initial two months of the quarter together, the picture for the second quarter as a whole looks weak. On average, exports over April and May rose 0.8 percent compared to the first quarter, while imports rose 2.3 percent, implying that net trade might have provided a second straight negative contribution to GDP growth.

The outlook for German exports appears highly uncertain, noted Daiwa Capital Research Markets in a report. The protectionist U.S. trade policies, and the threat of an increased tariff on EU car imports, is already being a drag on business sentiment, while surveys imply that external demand has already faded. For instance, the new export orders index of the German manufacturing PMI survey fell to a two-year low in June, foreshadowing softness in export growth ahead, stated Daiwa Capital Research Market.

At 17:00 GMT the FxWirePro's Hourly Strength Index of Euro was bearish at 87.6635, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -5.45213. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex