Euro US Dollar (EUR/USD) Exchange Rate Slumps in Response to Abysmal German Data

EUR/USD Exchange Rate Dives Down as German Data Prints Low

The Euro US Dollar exchange rate (EUR/USD) rate dropped this morning, as new data reported a 3.7% drop in Germany’s Factory Orders. Subsequently, Germany’s economic sentiment failed to reach forecast levels.

At the time of writing, the Euro is trading around $1.1852, down 0.4% from the start of today’s session.

Euro (EUR) Plummets over Decline in Factory Orders, Low Economic Sentiment

The Euro (EUR) dropped against the US Dollar (USD) this morning as German Factory Orders printed significantly lower than expected at -3.7%: the largest decline in over a year. This was dramatically short of the 1% expansion that had been predicted by economists, and will stoke concerns over the pace of Germany’s economic recovery.

The slump in factory orders is thought to reflect difficulties in car exports, usually a growth driver for the German economy. According to the Guardian: ‘the global shortage of key parts such as semiconductors is continuing to cause ructions.’

Following on from the Factory Orders disappointment, the single currency’s downturn has been exacerbated by lower than expected economic sentiment, as printed by Germany’s ZEW Index. The indicator dropped 16.5 points from the previous month, to the lowest level since January.

Analysts remain optimistic that economic development will continue to improve as ZEW President Achim Wambach observes: ‘Although the ZEW indicator of economic sentiment has once again fallen significantly, it is still at a very high level.’ EUR traders, however, remain bearish.

US Dollar (USD) Sees Modest Gains on Eurozone Losses and Renewed Covid Worries

Off the back of Germany’s poor data, the US Dollar (USD) has seen modest gains in its pairing with the Euro. The spread of the Covid Delta variant has helped to raise support for the safe haven currency.

Support for the ‘Greenback’ dipped off the back of Friday’s mixed Nonfarm Payrolls report and stayed low over the 4July weekend as markets were closed. USD now has a chance to rally, as Spain and Portugal report rising covid cases and Eurozone economic sentiment falls alongside German data.

This afternoon’s ISM Non-Manufacturing PMI has the potential to raise the ‘Buck’s’ prospects further, as it’s expected to reach 63. Anything above forecast is likely to encourage USD investors, bringing bearish sentiment to an end.

EUR/USD Trading Outlook: US Dollar to Extend Gains on Positive PMI Release?

With Euro volatility high following poor German and Eurozone data, it seems likely that the US Dollar will continue to recoup gains through the remainder of today’s session.

The publication of the US ISM Non-Manufacturing PMI later this afternoon is likely to bolster the ‘Greenback’ further if it demonstrates continued expansion in the services sector, as expected. Conversely, EUR could stage a recovery if tomorrow’s figures for German Industrial Production demonstrate a rebound in orders, although the increase is expected to be negligible at 0.5%.

Olivia Evershed

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