Euro Unfazed By German Growth As ECB Rate Warnings Drive Bulls

Euro Unfazed By German Growth As ECB Rate Warnings Drive Bulls

Dollar weakness further boosted the appeal of the world’s second most liquid currency: the euro. EURUSD extended its Thursday reversal by an additional 185 points to bring resistance - seen around 1.58 - within bulls’ reach. For European fundamentals, the only scheduled indicator to cross the wires couldn’t trip up the euro’s rise. German industrial production unexpectedly fell 0.8 percent through April as raw material costs rose. What’s more, factory orders contracted for the fifth consecutive month for the worst streak since 1992. The weakness in demand highlights the dour outlook for growth. Indeed, the German Bundesbank remarked that after the surprise 12-year high in growth through the first quarter, activity in Deutschland over the second and third quarters would be “more subdued.” However, the ECB is clearly less concerned with growth and more attuned to inflation. In a speech Friday, ECB member Alex Weber confirmed the market’s forecast for a July rate hike when he said financial markets clearly understood the ECB’s message at yesterday’s public address.