German Industrial Production Beats Expectations in a Risk-on Backdrop

It is a busy start to the week on the economic calendar. The German economy was in the spotlight this morning, with industrial production figures in focus.

In November, industrial production rose by 0.2% in Germany versus a forecasted 0.1% increase. Production fell by 0.4% in October.

According to Destatis,

• Production in industry excluding energy and construction rose by 0.5% in November.
• Within industry, the production of intermediate goods and capital goods rose by 1.1% and 0.7%, respectively.
• However, the production of consumer goods slid by 1.5%.
• Outside industry, energy production increased by 3.0%, while production in construction slid by 2.2%.
• Compared with November 2021, industrial production fell by 0.4%.

While the latest report was more upbeat than the factory order numbers from last week, the outlook remains uncertain.

While the latest report was more upbeat than the factory order numbers from last week, the outlook remains uncertain.

Factory orders slid by 5.3% in November, with the German manufacturing sector contracting. According to the December survey, the contraction rate in production eased to a modest pace in December. However, considering the November slump in factory orders, industrial production numbers for December could be grim reading.

Investors will take comfort in the softening inflation environment and the reopening in China that could reignite demand.

EUR/USD Price Action

Ahead of the industrial production figures, the EUR/USD fell to an early low of $1.06394 before rallying to a pre-stat high of $1.06865. Market sentiment toward Fed monetary policy and hopes of an economic rebound in China delivered early support.

In response to the industrial production numbers, the EUR/USD rose to a post-stat high of $1.06893.

At the time of writing, the EUR was up 0.40% to $1.06874.

Up Next

French trade data and Eurozone unemployment figures are due out later this morning. However, barring an unexpected rise in the Eurozone unemployment rate, the stats should have a muted influence on investor sentiment.

Following the latest round of economic indicators, including softer Eurozone inflation figures, ECB member chatter needs monitoring. However, no ECB members are due to speak today, leaving commentary to the media to influence.

While no ECB members are on the calendar to speak, the ECB will release Economic Bulletin pre-releases on wages, which should draw interest. Wage growth is an area of focus vis-à-vis monetary policy.

On Friday, ECB Chief Economist Philip Lane saw wages continuing to pressure inflation for two or three years. Lane reportedly noted that even if energy costs began to ease, price pressures would remain elevated.

Lane’s comments emphasized the influence of wage growth numbers on ECB monetary policy.

From the US, there are no economic indicators for investors to consider later in the day, leaving the EUR/USD in the hands of market risk sentiment and FOMC member chatter.

Fed Chair Powell speaks tomorrow. While the markets have placed their bets, Fed Chair Powell could put a 50-basis point rate hike back on the table.