The US dollar has stabilized after yesterday’s flurry that shook out some weak short euro and yen positions.The push through $1.08 was seen as a new opportunity to short the euro by short-term traders. Disappointing eurozone GDP data provided mode fodder for the euro bears and the single currency has retreated nearly 3/4 of a cent from yesterday’s highs. 

As a whole, the eurozone grew 0.3% in Q3, slightly less than the 0.4% seen in Q2. The consensus expected the Q2 pace to have been maintained.To put the region’s output into a larger perspective, consider that it is about half a percent lower than it was in Q1 08.   

German GDP rose 0.3% in the first estimate, which disappointed, but it did not really tell investors anything it did not already know. The European locomotive has been hampered by the slowing of China and the sanctions on Russia. Industrial output in Germany fell in August and September.It has contracted in three of the past four months.The forward looking factory orders fell every month in Q3 for a cumulative decline of almost 6%. Next week’s ZEW survey is likely to show the continued deterioration in sentiment., 

France expanded by 0.3%. That is spot on the consensus forecast and compares with a flat Q2 reading.The inventory cycle explains much of the vagaries of the swings.In Q2, inventory liquidation reduced growth by 0.4 percentage points while in Q3 the restocking added 0.7 percentage points.Household consumption also contributed. 

Italy’s recovery continues, but it is anemic.EMU’s third largest economy expanded 0.2% in Q3 after 0.3% in Q2 and 0.4% in Q1. Still, Italy will snap the three year contraction here in 2015.Last week, ISTAT forecast the economy to grow 1.4% next year, which seems optimistic.

Since Monday, the dollar has been recording lower highs against the yen.Today’s low of JPY122.50 is the low for the week. The pullback remains modest given that the greenback was near JPY120 at the start of the month and JPY118 in mid-October.The 38.2% retracement of the advance from November 2 (~JPY120.25) is found near JPY122.30.