German Data, Recovery Plan Help the Euro
The euro posted gains in early European forex trading on Monday. This is partly because the signs of a German economic recovery are helping the euro. Additionally, the hopes for more stimulus for the region in the near future buoys the currency.
German factory orders rose by 10.4% in May. That came due to demand rebounding after the country loosened restrictions to contain the spread of coronavirus. This adds to the evidence that Europe’s economy is starting to recover.
Analysts at ING said that after two devastating months, today’s increase is the largest monthly increase ever. Even after Monday’s increase, booked orders are some 30% below the first quarter levels.
Today’s industrial data for orders brings with it two important messages. As governments have lifted lockdown measures, V-shaped surges were brought into activity. However, the return to pre-crisis levels will not be easy, the bank added.
The FX market will be looking out for any new signals on the region’s recovery fund. For that, they will await the meeting of euro-area finance ministers on Thursday. This will be before the July 17-18 summit of the region’s leaders.
Europe’s economic powerhouse (Germany), will be very keen to arrange a consensus about the structure of the recovery fund. It currently holds the six-month rotating presidency of the European Union.
The Euro and Other Currencies
The dollar was down on Monday as investors were leaving the safe-haven asset. This was amid optimism over U.S. service sector activity data for June due on late Monday.
Forecasts predict a reading of 50 for the Institute for Supply Management non-manufacturing purchasing manager’s index.
The AUD/USD pair gained 0.6% to 0.6979, buoyed by rising prices for copper and other export commodities. The Reserve Bank of Australia will have its policy meeting on Tuesday. It is expected to keep its key rate at 0.25%.
Forex news reports, the pound fell against the euro and held steady against the U.S. dollar. This is while traders looked ahead to this month’s Brexit negotiations and the further government support measures expected later this week.
Traders expect more clarity by the end of July. This will be on whether Britain will agree on a trade deal with the European Union.