- Euro under pressure after German industrial production plunged
- Dollar investors are looking ahead to the release of the US Labour Department’s non-farm payroll report
The euro bounced off a fresh year to date low of US$1.0964 versus the dollar, but still closed Thursday’s session below the critical US$1.10 level.
The pair (EUR/USD) is once again slipping lower in early trade on Friday, as investors digest more weak German data and look ahead to the all important and highly anticipated US non-farm payrolls.
USD/EUR- Euro under pressure after German industrial production plunged
The euro is under pressure this morning after German industrial production dropped by more than expected in December. Official data showed that industrial production declined -3.5% month on month in December and plunged by -6.8% year on year.
The data comes following yesterday’s disappointing German data. Factory orders in Europe’s largest economy unexpectedly dived -2.1% in December compared with the previous month. Analysts had been forecasting an increase of 0.8%. Factory orders are closely watched because they are a good indication of future demand.
Recent data suggests that the slowdown in the German manufacturing sector is far from over and indeed could be picking up.
Dollar investors are looking ahead to the release of the US Labour Department’s non-farm payroll report
Dollar investors are looking ahead to the release of the US Labour Department’s non-farm payroll report. This report is the most closely watched US macro release across the month because it is the broadest analysts of the US labour market; a key indicator as to the health of the US economy.
After solid data releases across the past week, investor expectations are running high. Analysts predict that 160,000 jobs were created in January, up from 145,000 created in December. The unemployment rate is expected to remain at 3.5%, whilst hourly wages are forecast to have risen from 0.1% in December to 0.3%.
The ADP private payroll report has a strong positive correlation to the non-farm payroll report. The ADP report smashed expectations with the strongest job creation number for almost half a decade. The employment component of the ISM manufacturing report also pointed to strong job creation. However, this was not the case in the dominant service sector. As a result, the lead indicators are mixed meaning it is harder to predict whether the non-farm payroll reading will meet expectations or not. A solid print will support the views that the US economy is on a firm footing, boosting the dollar.
