Unexpectedly disappointing economic data in the Eurozone put a dent in investor sentiment which resulted in the Euro’s decline; investors also remain wary ahead of the ECB’s policy review and interest rate decision which is due tomorrow. Deutsche Bundesbank reported that Germany’s factory orders fell in June to -3.2% on a month-over-month basis, well below analysts’ expectations of a rise from negative territory to 1.00%. That decline in factory orders was the largest monthly drop in nearly three years, and given that Germany is generally viewed as the power behind the Eurozone’s growth, the dismal data hit the Euro hard. Italy’s 2nd quarter GDP reorted in a recessionary trend at -0.3% also pushed FX trade away from the common currency.
As reported at 11:57 a.m. (JST) in Tokyo, the EUR/JPY was trading at 136.16 Yen, an 8-month trough, while the EUR/CHF fell to 1.2140 Swiss Francs, a 3-week low. The Euro had initially slipped against the greenback but then later recovered, with the EUR/USD pair currently trading at 1.3385.
Will Latest Data Sway ECB?
Markets will be waiting to see what Mario Draghi will say after tomorrow’s policy decision; analysts’ consensus is calling for the European Central Bank to maintain policy. However, given the recent spate of disappointing data there are some analysts who now believe that the ECB president could hint at the future possibility of some form of quantitative easing to ensure that the Eurozone economy, already struggling with low inflation, recovers.