Shock Slump in German Factory Orders Drags EUR/USD Exchange Rate Lower
The Euro (EUR) has slipped against the US Dollar (USD) today; this deterioration in the EUR/USD exchange rate is down to the latest German data.
June’s factory orders reading has alarmed Euro traders by shifting from 2.6% growth to a contraction of -4%; a much smaller -0.4% printing was expected.
Additionally, construction activity has almost fallen into the sub-50 point contraction range by dropping from 53 points to 50.
While the factory orders stats have rattled Euro traders today, Marc Ostwald of ADM Investor Services believes that the data could be inaccurate:
‘The fact that every single category fell – be that domestic, Eurozone & Non-Eurozone or Capital Goods, Consumer Durables or Intermediate Goods – looks to be highly anomalous, in so far as there is rarely ever a month where there is a “parallel shift” down, barring events such as the global financial crisis of 2008.’
US Dollar to Euro (USD/EUR) Exchange Rate Rises on Continued Jobs Market Optimism
There has been limited US economic news out today, but the US Dollar (USD) has still risen against the Euro (EUR) thanks to high USD trader sentiment.
Last Friday’s US jobs market data included news of the unemployment rate falling from 4% to 3.9%, along with a relatively supportive non-farm payrolls reading.
Both data releases raised support for the US Dollar and today’s appreciation suggests optimism levels are still high from the initial data release.
More recently, the USD has also appreciated thanks to rising trader sentiment about the US economy, as Paul Eitelman of Russell Investments explains:
‘The US economy is doing well and the Fed is moving towards a more predictable path of interest rates than earlier which has prompted us to change our underweight positions on US debt to neutral in some portfolios.’
Euro to US Dollar Exchange Rate Forecast: Can EUR/USD Recover on Booming German Trade Balance?
The morning’s figures are tipped to show an expansion of the German trade surplus, up from €19.7bn in May to €24.5bn in June.
Such growth could reassure EUR traders about Germany’s stability when it comes to international trading and lead to EUR/USD exchange rate gains.
That said, German industrial production stats out on Tuesday could limit a Euro to US Dollar (EUR/USD) advance if they show a forecast-matching slowdown.
Another factor which could make tomorrow’s EUR/USD gains somewhat short-lived will be the afternoon’s US economic optimism reading for August.
Provided by IBD/TIPP, this is expected to show an improvement in sentiment about the economy with a rise from 56.4 points to 57.2.
While such a reading won’t directly translate to increased odds of a Federal Reserve interest rate hike, such news could still cause a USD/EUR exchange rate rise.