The euro is edging lower in early trade on Friday, pausing for breath after rallying to a yearly high of US$1.1249 in the Asian session. The Euro to US dollar exchange rate closed Thursday 0.75% higher.
EUR/USD is on track for gains in the region of 1.6% across the week, its third straight week of advances.
German Factory Orders Jump 5.5% MoM
The euro has been on the rise across recent sessions as investors are turning to the common currency as a preferred safe have amid the coronavirus outbreak. Usually the US Dollar is considered the safe haven. However, investors expect the Federal Reserve to cut interest rates again. Meanwhile, the ECB already have rates running at negative and so are less likely to take dramatic action. Additionally, the euro is backed by the eurozone’s large current account surplus.
Today, the euro is slightly lower despite impressive German factory orders data. The data revealed that German factory orders jumped 5.5% month on month in January, a significant improvement from December’s -2.1% decline. The data shows that the recovery in the German manufacturing sector is well underway. However, this could all change in coming data releases as the impact of coronavirus becomes more apparent.
US Dollar Looks To Non Farm Payroll
The dollar has been under pressure across the week, despite strong data, amid speculation that the Fed could cut interest rates further. On Monday the Fed cut rates by 50 basis points. Even so this still leaves the Fed with plenty of room to act again if necessary. Given the panic in the financial markets then there is a god chance that further measures could be necessary.
Today investors will turn their attention to US non-farm payroll. The most highly anticipated data release of the month. After a bumper January reading, investors will be keen to see whether February’s payroll report show signs on the coronavirus inspired slowdown.
Analysts are expecting 175,000 news jobs to have been created in February and unemployment rate to hold steady at 3.6%. Analysts are predicting that hourly wages will increase 0.3%, up from 0.,2%.
The lead indicators for the payroll report. Namely the ADP Private payrolls report and the employment component from the ISM non manufacturing report point to an upbeat figure. Any signs of weakness could unnerve investors quickly.
