Germany's manufacturing sector grows for first time since 2022

[Ben Graham]

The euro gained noticeably on positive news from Europe's largest economy, Germany. The country's manufacturing sector, according to the latest reports, expanded for the first time since 2022. This long-awaited uptick was made possible by generous government investment aimed at supporting key industries intended to drive the recovery.

According to published data, the S&P Global manufacturing purchasing managers' index for Germany reached 50.7 points in February. This is a marked improvement from the 49.1 points recorded the previous month. Crossing the 50-point threshold, which traditionally separates expansion from contraction in activity, marked the end of a prolonged period of weakness that had weighed on output and employment in the sector.

This milestone for German industry not only had a positive effect on the single currency but also lends optimism to the outlook. The successful exit from the downturn suggests support measures are working and raises the prospect that other euro-area countries may benefit from the same positive impulse.

All this also pushed Germany's composite PMI to a four-month high of 53.1 points, beating analysts' forecasts, which had expected a rise to 52.3 points.

It is now plain that the German economy is finally recovering after many years of stagnation, largely thanks to large-scale public spending. Economists caution, however, that the revival of the pivotal manufacturing sector will take time.

Despite the fragility of the economic backdrop, the Bundesbank this week affirmed that Germany's recovery is likely to continue in the first quarter, albeit at a modest pace. Stronger industrial growth is expected to accelerate from spring, primarily driven by fiscal stimulus.

A technical outlook for EUR/USD suggests that buyers should consider reclaiming 1.1770. That would open the way to test 1.1790. From there, a move to 1.1825 is possible, although advancing beyond that without support from major players would be difficult. The extended target is 1.1850. On a decline, meaningful buying interest is likely near 1.1745. If buyers do not appear there, it would be prudent to wait for a new low at 1.1720 or to open long positions from 1.1690.

The material has been provided by InstaForex Company - www.instaforex.com