EUR/USD EDGES UP AFTER UNEXPECTED RISE IN GERMAN TRADE SURPLUS

• Germany’s trade surplus comes out much higher than expected, signaling increased Euro demand for its exports.
• The Euro is the most popular currency amongst global central banks, according to a recent survey. 
• The EUR/USD price charts show an extension of the short-term uptrend. 

The EUR/USD pair is seeing a slight lift on Wednesday, trading in the 1.0860s against the US Dollar (USD), just after the release of strong German trade data, which showed a greater-than-expected rise in the country’s trade surplus. 

Germany’s Trade Balance rose to €27.8 billion in January, beating estimates of €21.5 billion and the previous surplus of €23.3 billion, according to data from Statistisches Bundesamt Deutschland (SBD).

The release suggests more demand for Euros from foreign importers of German goods. It follows strong Eurozone PMI data released on Tuesday, and contrasts with lackluster US factory and PMI data, which has taken the wind out of the Dollar’s sails. 

Euro gains appeal

The Euro is the most popular currency among global central banks, the big fish players in the currency markets, according to a recent survey by a London-based think tank. 

Roughly 15 central banks anticipate increasing their reserves of Euros in 2024-25, according to a survey of 75 major central bank reserve managers by the think tank OMFIF. 

“Net demand was higher than for any other currency during the period and a jump from the 2021 and 2022 surveys of reserve managers controlling nearly $5 trillion,” said a report by Reuters, citing the survey. 

The resurfacing of Eurozone bond yields into positive territory after years of negative rates, as well as a relatively more robust outlook going forward – despite expectations of interest rate cuts – was the reason given by central bankers for their pursuit of the Euro.  

On the Horizon

Eurozone Retail Sales data is released later today at 10:00 GMT and expected to show a slide of 1.3% in January YoY but a 0.1% rise MoM. A much higher than expected reading would be positive for the Euro. 

The key event for the week, however, is the European Central Bank (ECB) policy meeting on Thursday. Analysts are looking for a shift in communication: so far the ECB has kept schtum about when it anticipates cutting rates, in contrast with less reserved peers. However, some analysts are saying March could be the time it throws caution to the wind