The euro remained range-bound against the greenback despite the ECB’s 25-bps interest rate cut announcement yesterday. The interest rate cut is the first since 2019. The US first-time weekly unemployment claims also missed forecasts. This ensured range-bound movement in the EUR/USD pair. In the last 24 hours, the EUR/USD pair traded in a range of 1.0860 to 1.0877.
According to Destatis, German factory orders inched down 0.20% m-o-m in April following a 0.80% decline in the previous month, missing forecasts of 0.60% growth.
Excluding large-scale orders, fresh orders rose by 2.90% m-o-m in April.
Also, the country’s factory orders declined by 5.40% q-o-q in the three months that ended in April 2024, compared with the previous three months. Excluding large-scale orders, fresh orders fell by 1.40% in the three months that ended in April, compared with the earlier three months.
On a y-o-y basis, German factory orders fell by 1.60% in April.
Fresh orders for the manufacture of other transport equipment (aircraft, trains, and ships) dipped 15.40% m-o-m in April. Likewise, orders for computer, electronic, and optical products decreased by 5.10% m-o-m in April. The orders for the manufacture of electrical equipment fell by 4.10% m-o-m in April. Additionally, orders for the manufacture of machinery and equipment decreased by 1.50% in April. On the contrary, orders for the automotive industry grew by 4.10% m-o-m in April.
Fresh orders rose by 0.50% and 0.70% in the capital goods and consumer goods sectors, respectively. The intermediate goods sector posted a decline of 1.70% in fresh orders. Overseas orders inched down 0.10% m-o-m in April.
According to the initial estimates from Eurostat, the Eurozone retail sales volume inched down 0.50% m-o-m in April after a 0.70% increase in the previous month. The reported figures were worse than forecasts of a 0.20% decline.
The decline was led by a 0.50% m-o-m decrease in the volume of retail trade in April. Also, the retail sales volume of non-food products (excluding automotive fuel) fell by 0.10% in the same period. Automotive fuel recorded a decrease of 2.20%.
On a y-o-y basis, Eurozone retail sales stood unchanged in April 2024. Retail sales volumes of food, drinks, and tobacco fell by 0.50% y-o-y in April 2024. However, non-food products (except automotive fuel) posted an increase of 0.40%. Similarly, automotive fuel recorded a rise of 0.30%.
Later in the day, the European Central Bank (ECB) proactively reduced its benchmark interest rate by 0.25 bps, lowering it to 3.75% from the previous level of 4%. This decision places the ECB in front of the U.S. Federal Reserve in a global trend toward decreasing financing costs, significantly impacting homeowners, savers, and investors.
During the meeting of its 26-member rate-fixing committee in Frankfurt, the ECB also updated its macroeconomic outlook. It lifted the 2024 annual average inflation forecast to 2.5%, up from 2.3%, and adjusted the 2025 estimate to 2.2% from 2%. The 2026 forecast remains steady at 1.9%.
Although the Eurozone’s inflation rate decreased to 2.6% in May from a high of 10.6% in October 2022, the decrease has been hindered, with a slight increase from 2.4% in April. Inflationary pressure in the services sector stays higher at 4.1%. Despite the initial impact of Russia’s energy cutoff, energy prices have stabilized, bringing overall inflation closer to the ECB’s 2% target.
According to the US Department of Labor, the country’s jobless claims rose to 229,000 in the week ending June 1 from 221,000 (upwardly revised from 219,000) in the previous week, missing forecasts of 220,000.
The four-week moving average was 222,250, down from 223,000 (upwardly revised from 222,500) in the previous week.
The rate cut is expected to turn the euro slightly weaker against its rivals, including the greenback, in the days ahead.
Technically, the EUR/USD pair is ascending after testing the support at 1.0805. The next resistance is anticipated to be only near 1.0980. Additionally, the currency pair is trading above its 50-day moving average, while the MACD indicator is showing a positive reading. Therefore, we anticipate the EUR/USD pair to remain in an uptrend in the near term.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
