German Factory Orders Unexpectedly Rise in January

It was a relatively quiet start to the European session. The German economy was in the spotlight, with factory orders in focus.

German factory orders unexpectedly rose by 1.00% in January versus a forecasted 0.9% decline. In December, factory orders jumped by 3.4%.

According to Destatis,

• Foreign orders increased by 5.5%, while domestic orders slid by 5.3%.
• Orders from the euro area fell by 2.9%, while orders from the rest of the world surged by 11.2%.
• Orders in the capital goods sector increased by 8.9%, while orders in the intermediate goods sector fell by 8.9%. The consumer goods sector recorded a 5.5% decline in new orders.
• Beyond the aircraft and spaceship construction sector (+138.5%), manufacturers of motor vehicle engines saw a sharp increase in new orders (+6.8%).
• Excluding large-scale orders, factory orders were up 2.9%, while factory orders were down 10.9% year-over-year.

The better-than-expected numbers deviated from recent survey-based numbers. According to the February survey, new orders fell at the slowest pace in nine months but remained steep.

While investors focused on Fed Chair Powell later today, investors need to monitor ECB member speeches. However, no ECB Executive Board members are on the calendar to speak, leaving commentary with the media to move the dial.

On Monday, ECB Chief Economist Philip Lane looked beyond March and spoke of needing to lift rates beyond March. Lane reportedly said,

“The heatmap suggests still strong inflationary pressures, but some signs of easing are emerging.”

EUR/USD Reaction to German Factory Orders

Ahead of the factory order numbers, the EUR/USD rose to a high of $1.06934 before falling to a pre-stat low of $1.06746.

However, in response to the stats from Germany, the EUR/USD rose to a high of $1.06806 before falling to a session low of $1.06746.

The EUR/USD was down 0.04% to $1.06784 this morning.

Up Next

Looking ahead to the US session, it is another quiet day on the US economic calendar. There are no US economic indicators for investors to consider during the US session. The lack of stats will leave the Federal Reserve in the spotlight. Fed Chair Powell will deliver testimony, with a hawkish Fed Chair would put the EUR/USD on the back foot.

US economic indicators support a more aggressive Fed interest rate trajectory to tackle sticky inflation. Lawmakers will likely grill the Fed Chair over its delays in tightening monetary policy and the interest rate trajectory considering the US unemployment rate stands at 3.4%.

Dovish commentary and the talk of slow and steady would tilt monetary policy divergence in favor of the ECB and deliver a EUR/USD breakout.

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