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German Factory Orders Advance More-Than-Expected, Euro Halts Two-Day Advance

German Factory Orders Advance More-Than-Expected, Euro Halts Two-Day Advance

2010-03-05 12:59:00
Michael Wright, Currency Analyst
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Overview
Factory orders in Europe’s largest economy advanced 4.3% in January after climbing a revised 0.4% the previous month, with the reading more than tripling economists’ expectations of 1.3%. At the same time, annualized orders soared 19.6% amid forecasts of 15.4%, the Economy Ministry in Berlin said today. Indeed, Germany is benefiting from the global recovery, while its domestic demand begins to show signs of life.

Market Reaction
There was little to no response in the currency markets following Germany’s factory orders, however, looking at the daily chart, the EUR/USD has recently broke out of its downward channel which has held since mid-January, and the pair may be subject to a short-term rally, with a soft target at 1.3674, followed by a second target of 1.3770.

EURUSD

Forecast
German Chancellor Angela Merkel said Europe’s largest economy should “stand by” Greece ahead of the meeting with Greek Prime Minister George Papandreou, and went onto add that yesterday’s bond issue “gives us cause for optimism.” Looking ahead, investors are weighing in a zero percent probability that the European Central Bank will raise borrowing costs twenty basis points at its next rate decision meeting on April 8th, according to the Credit Suisse overnight index swaps index. Meanwhile, ECB President Trichet announced that the unwinding of the emergency measures “shouldn’t be interpreted as a change of out monetary policy,” and reiterated that the interest rate remains “appropriate” as the central bank aims to manage the euro-zone risks for operating under a single currency. However, it is noteworthy that Axel Weber publicized last month that the recovery will not gather pace before 2011.

Written by Michael Wright, Daily FX Research
Questions? Comments? Email me at instructor@dailyfx.com

 

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