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It’s The Day of The EUR

By:
Bob Mason
Updated: Mar 7, 2017, 10:15 UTC

The Dollar recovery was complete through the European and U.S session on Monday, losses through the Asian session having rebounded,

It’s The Day of The EUR

The Dollar recovery was complete through the European and U.S session on Monday, losses through the Asian session having rebounded, though the better than forecasted increase in factory orders had little to do with the gains.

With the Dollar seeing yet another Asian session end in the red today, the day ahead will likely be dictated by economic data out of the Eurozone this morning, Germany’s January factory orders are below expectation at -7.4% compare to 5.2% a month earlier. The Eurozone’s 3rd quarter GDP figures were released inline with expectations.

Economic data out of Germany has been mixed of late and, while last December’s surge in factory orders is expected to lead to a jump in January industrial production, the figures released this morning were far from impressive, orders falling by 7.4% though the data had little immediate impact on the EUR ahead of the ECB’s monetary policy decision and press conference on Thursday.

We’re not expecting any revisions to the GDP figures to influence the EUR, the latest GDP figures released having been in line with prelims for France, Spain and Germany, so it’s all about geo-political risk and noise over North Korea through the European session.

The markets will certainly be paying close attention to stats out of the Eurozone ahead of Thursday’s ECB press conference, the acceleration in inflation in February to beyond the ECB’s target, raising questions over whether Draghi will be able to maintain the current monetary policy position. It would be a tall order for the ECB to justify maintaining policy unchanged in the months ahead, rising prices certainly a risk factor to the Eurozone economy.

Putting the macro aside, Fillon’s survival weighed on the EUR through the European session as we had expected, should Juppe have stood aside, though the downside for the EUR was reversed through the U.S session as tension over North Korea’s missile tests and the arrival of a U.S missile defense system weighed on market risk appetite. How far Trump is willing to go remains to be seen, but the increased presence will not only ruffle the North Korean feathers, but also those of China.

It’s not the first time that the EUR has been on the rise amidst rising geo-political tension and with the EUR a major funding currency, the shift in market risk sentiment certainly continues to provide support for the EUR through the early part of the European session, the EUR/USD up just 0.01% at $1.059834 at the time of the report, easing from an intraday high of $1.06030.

The Dollar Spot Index has recovered from early losses, up 0.02% at 101.66, though January’s trade balance is expected to be a further drag on the economy at the start of the 1st quarter, though we don’t expect the Dollar to see any material decline. After all, assuming this week’s nonfarm payroll figures deliver, the FED’s about to lift rates for the 2nd consecutive quarter…

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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