EUR/USD Exchange Rate Rangebound after Iranian Missile Strikes
The Euro to US Dollar (EUR/USD) exchange rate is mostly muted this morning after Iran carried out a ballistic missile attack against two US airbases in Iraq.
At the time of writing EUR/USD exchange rate is trading at around $1.1128, slightly down from the morning’s opening levels.
US Dollar (USD) Kept in Check by Trump Tweet in Response to Missile Attack
In spite of Iran’s missile strikes against US bases in Iraq spooking markets overnight, the US Dollar (USD) is mostly rangebound this morning.
While the ‘Greenback’ accelerated overnight as the attack saw demand for safe-haven assets spike, it has subsequently retreated as markets were calmed again by a tweet from Donald Trump in which he claimed ‘all is well’.
All is well! Missiles launched from Iran at two military bases located in Iraq. Assessment of casualties & damages taking place now. So far, so good! We have the most powerful and well equipped military anywhere in the world, by far! I will be making a statement tomorrow morning.
— Donald J. Trump (@realDonaldTrump) January 8, 2020
Analysts are hopeful that a measured response from Trump could help to de-escalate tensions in the region by allowing Iran to claim the attack as a win.
Jim Reid, Head of Global Fundamental Credit Strategy at Deutsche Bank suggests:
‘In the past President Trump has shown restraint in previous attacks in the region blamed on Iran which didn’t kill any US citizens. This gives a glimmer of hope that this might not lead to an all-out escalation in the conflict.
‘There are already some commentators saying that if the US doesn’t ratchet up tensions further this could be good news for risk as it might be spun by Iran as a big response and the world can move on for now.’
Euro (EUR) Weakens as German Factory Orders Plummet
Meanwhile, the Euro (EUR) is struggling to find momentum this morning following the publication of Germany’s latest factory order figures.
According to data published by Germany’s federal statistics agency, Destatis, factory order growth contracted 1.3% from an upwardly revised 0.2% expansion in November. Missing expectations for a modest rise of 0.3%.
The unexpected slump in industrial orders will come as a disappointment to EUR investors, many of whom had hoped Germany’s factory sector would start showing signs of recovery at the end of 2019.
Carsten Brzeski, chief economist at ING comments:
‘On the year, new orders were down by a dire 6.5%. The great order book deflation in German industry continues. In fact, it looks as if 2019 will be the second year in a row in which new orders have fallen.
‘All in all, there are still no signs at all of a bottoming out for German industry. Instead, the free fall continues. In fact, there is simply one word to describe the current state of the German industry: ‘dire’.’
The continued slump in Germany’s industrial sector is also likely to reignite concerns that the Eurozone’s largest economy stagnated in the last quarter of 2019.
EUR/USD Exchange Rate Forecast: German Industrial Production to Also Disappoint?
Looking ahead, the Euro US Dollar (EUR/USD) exchange rate may come under additional pressure tomorrow with the publication of Germany’s industrial production figures.
Economists previously forecast German industrial output would have rebounded alongside factory orders in November, but the unexpectedly sharp slump in orders may sow some doubts.
Expect to see the Euro face some headwinds if industrial production also misses the mark on Thursday.
Meanwhile, the focus for USD investors in the latter half of the week will be on the highly influential non-farm payroll figures.
Analysts are forecasting the US workforce will have expanded by 164,000 in December, down from a ten-month high of 266,000 in November.
However, there are concerns that employment growth may have been slower-than-expected last month as the US manufacturing sector recorded its worst contraction in over a decade.