31.10.202400:39 Forex Analysis & Reviews: EUR/USD Analysis: Eurozone GDP, US GDP, German Inflation, and ADP Report

The Eurozone GDP grew by 0.4% in the third quarter, while most experts had forecasted a 0.2% increase. This is the strongest growth rate since early 2022 when the European economy grew by 0.8% in Q2 2022. Annually, GDP rose by 0.9% (forecast: 0.8%), the strongest growth rate since Q1 2023. The report shows that Spain's GDP grew by 0.8% in Q3, France by 0.4%, and Germany by 0.2%.

The stronger-than-expected growth in the Eurozone economy has provided substantial support to the euro.

On the other side of the equation are US macroeconomic reports and... Donald Trump gained ground a week before the US presidential elections. Kamala Harris' lead over the Republican candidate has narrowed to just one percent. Harris currently has 44% voter support, while Trump has 43%. Her lead has been shrinking since late September, and the candidates are nearly tied. Growing concerns that a potential Trump victory may lead to increased tariffs and a renewed trade war with China have prevented EUR/USD buyers from capitalizing on their gains.

Contradictory US macroeconomic data have also put pressure on the pair. On one side, we have data showing US economic growth in Q3 (falling short of expectations), and on the other, a stronger-than-expected ADP report.

In Q3, the US GDP grew by 2.8%, compared to a forecast of 3.0%. Recall that the US economy grew 3.0% in Q2 and 1.4% in Q1 this year. This means that while the GDP didn't meet forecasts, it still reflects a strong performance. The Core Personal Consumption Expenditures (Core PCE), which excludes energy and food prices, remained in the green, declining to 2.2% year-over-year, against an expected drop to 2.0%.

The US GDP report can be interpreted positively and negatively for the dollar (in my view, the release favors the dollar). However, the ADP report leaves no such room for doubt. Here, dollar bulls are clear winners. Most experts had anticipated that the ADP release, which often serves as an indicator before the official labor data, would disappoint EUR/USD sellers. The forecast was indeed weak—only 110,000 new jobs. However, ADP reported a 230,000 job increase, signaling that Friday's Nonfarm Payrolls could also land in the green, giving the dollar strong support. Nonfarm Payrolls are projected to increase by 111,000 in the non-farm sector for October. If the official release exceeds 200,000, we may see another dollar rally. The latest ADP report has heightened the likelihood of this scenario.

Interestingly, EUR/USD buyers reacted little to the stronger-than-expected Eurozone GDP and German inflation data. For instance, Germany's Consumer Price Index (CPI) rose to 2.0% year-over-year. The harmonized index accelerated to 2.4% after two months of decline. German inflation data often correlates with broader Eurozone figures, so expecting an uptick in Eurozone inflation is logical. Early projections suggest the overall Eurozone CPI should rise to 1.9% (from 1.7%), with the core index reaching 2.7%. This report is due on Thursday, October 31.

Thus, the EUR/USD pair is in limbo. On the buyers' side, there is growth in the Eurozone economy, accelerating German inflation and possible Eurozone inflation acceleration. On the sellers' side, there is relatively strong data on US economic growth and a robust ADP report.

In my view, the "golden card" in this scenario will be the US October labor market data, which could either pull the pair down to the 1.07 range or enable EUR/USD buyers to break through the 1.0880 resistance level (the middle line of the Bollinger Bands on the daily chart) and test the 1.09 range. There are no strong arguments—neither in favor of long positions (despite the ongoing correction) nor short positions. The fundamental picture is too contradictory to support a sustainable price movement in either direction.