News Column

Euro Slides As German Factory Orders Decline Unexpectedly

August 6, 2014

BRUSSELS (Alliance News) - The euro fell sharply against its major opponents ahead of European deals on Wednesday, after data showed that German factory orders declined unexpectedly in June.

Destatis reported that German factory orders declined unexpectedly in June as both domestic and foreign orders decreased from prior month. Factory orders were down by an adjusted 3.2% in June from May, when it fell by 1.6%. Economists had forecast a 0.9% increase for June.

Within total orders, domestic orders declined 1.9% in June. Foreign orders dipped by 4.1% as demand from euro area plunged 10.4%.

Traders await the monetary policy announcement of the European Central Bank, due tomorrow. The European Central Bank is expected to leave monetary policy unchanged this week despite deflation concerns.

The meeting will be accompanied by press conference of ECB president Mario Draghi, scheduled at 8:30 am ET. Draghi is unlikely to unveil any further stimulus at tomorrow's meeting.

Investors sentiment weakened on concerns over Ukraine and Gaza. Polish Foreign Minister Radoslaw Sikorski indicated that Russian President Vladimir Putin could invade eastern Ukraine if Ukrainian forces continue to have success in their fight against pro-Russian separatists. Sikorski's comments came on the heels of news that Putin has ordered his government to draft a response to US and European sanctions.

Meanwhile, a 72-hour humanitarian cease-fire went into effect on Tuesday in the Gaza Strip, setting the stage for peace talks involving Israeli and Palestinian delegations in Cairo.

The euro fell to a 9-month low of 1.3348 against the US dollar, from an early high of 1.3375. The euro may test support near the 1.332 area.

Against the pound and the yen, the euro dropped to 1-week lows of 0.7915 and 136.95 from early highs of 0.7923 and 137.23, respectively. If the euro extends its downtrend, it is likely to find support around 0.78 against the pound and 136.52 against the yen.

Pulling away from an early high of 1.2160 against the Swiss franc, the euro slipped to a 2-day low of 1.2156. Continuation of bearish trend may lead the euro to a support around the 1.214 mark.

Looking ahead, Swiss CPI for July, Retail PMIs for July from major European economies and UK industrial and manufacturing production for June are due to be released in the European session.

In the New York session, US and Canada trade data for June are due.

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Source: Alliance News

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