A Widening Gap? UK GDP & German ZEW Survey

The difference in vaccine rollout within Europe is most likely to have a major impact on the respective economies.

Just as the UK moved to reopen certain non-essential businesses, Germany was headed in the opposite direction. The disconnect, aside from the political wrangling over vaccines, has had important effects on forex and their respective stock markets.

Despite the political controversy inside Germany over measures to deal with the virus, German businesses remain quite optimistic about the future.

For traders looking at the longer term, that might have further implications. The gap opening now in favor of the UK could potentially close once vaccine coverage through the continent is finally achieved.

That reversal of trade flows could be another opportunity, just as the current cycle has pushed the GBPEUR cross higher.

Hand Disinfection, Disinfection

Image Source: Pixabay

What the data says

Tomorrow sees the release of monthly UK GDP data from February.

Understandably, the UK was struggling in the middle of winter under the strictest lockdown yet. However, analysts broadly agree that January marked the low watermark for the UK this year. Projections for the February monthly GDP are of a 0.6% increase, compared to -2.9% in the prior month.

Under those circumstances, the March GDP would have to grow in excess of 2.4% for the UK to avoid a contraction in Q1. Still, having secured growth in the final quarter of the year, the UK is in a comfortable position to avoid a technical recession.

Unlike the continent.

Germany the best of the pack?

Later in the day, we get the ZEW survey of major German and EU businesses. This survey compares their current situation to where they think things will be in six months.

Most EU authorities agree that by the end of autumn, there would be enough vaccination to be hopeful of economic normalization. That’s within the timeframe of the ZEW survey. Therefore, this suggests that the survey reflects where businesses expect the economy to be when COVID is finally behind us.

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