European session review: EUR trades mixed as investors assess economic data for eurozone/Germany, awaiting ECB meeting

EUR traded mixed against its major rivals in the European session on Tuesday as investors assessed a raft of economic data from the eurozone and Germany, the region's biggest economy, awaiting the European Central Bank's (ECB) policy decision later this week.

The single European currency rose against GBP and NZD, fell against USD, CHF and CAD, and changed little against JPY and AUD.

Eurostat reported that the euro area's GDP contracted 0.3% q/q in the first quarter of 2021, compared with a preliminary estimate of 0.6% q/q drop. Economists had forecast the reading to be unrevised. In y/y terms, the GDP dropped 1.3% in the first quarter, much less than a previously estimated fall of 1.8%. 

Eurostat also said the eurozone's employment dropped 0.3% q/q in the first quarter and 1.8% y/y.

Meanwhile, data from Destatis revealed an unexpected decline in Germany's industrial production in April. According to the report, German industrial output dropped 1.0% m/m in April, following a revised 2.2% m/m rise in March. Economists had forecast an advance of 0.5% m/m. On a yearly basis, industrial production climbed 26.4% (primarily due to low base effects from 2020) after a 4.8% growth in the previous month.

Elsewhere, the latest survey from the ZEW showed that economic sentiment in Germany weakened unexpectedly in June. The ZEW Indicator of Economic Sentiment decreased to 79.8 early this month from 84.4 in the previous month. Economists had forecast the indicator to rise to 86.0. On a positive note, the indicator for the current economic situation improved to -9.1 from -40.1, returning to the pre-pandemic level of August 2019. Due to the very high economic expectations, the outlook is now much more positive than in summer 2019, the survey said.

Market participants are looking for outcomes of the ECB monetary policy meeting, which will be announced on Thursday. The bank will reconsider the pace of emergency bond buys that it jacked up in March to prevent an increase in borrowing costs hurting a recovery.