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The EUR/USD Holds Support Following Mixed Data
EUR/USD has been holding steady after earlier declining to a 1.1182 low, which coincides with the 10-day moving average. The decline over the last day was pretty big, just over two big figures from the 10-week high that was made at 1.1392. The move had been driven dollar short covering ahead of the April payrolls report Friday, though this has now petered out. April U.S. employment which is forecast to be 225K for the month, is an improvement over the 126k March headline but still lower than the 264k headline in February.
In economic news the German trade surplus narrows as imports surge. Germany posted a trade surplus of EUR 19.3 billion in March, down from EUR 20.0 billion in the previous month, as a weaker EUR boosts the nominal import bill and contributed to a 2.4% m/m rise in imports, which outstripped the 1.2% m/m rise in exports. The March number meant the accumulated surplus for the first quarter amounted to EUR 58.9 billion, down from EUR 60.4 billion in Q4 last year.
Despite a better trade surplus, German March industrial production unexpectedly dropped 0.5% m/m, against expectations for another small expansion. The numbers contrast with the strong current conditions indicators in IFO and ZEW surveys, but tie in with the weak orders numbers at the start of the year. They highlight that there are still risks to the recovery, but also that the current economic expansion is not so much driven by exports and the manufacturing sector, but domestic demand and services amid the strong labor market and the rise in real disposable income on the back of robust wage growth and low inflation.
Italian and Spanish production numbers were higher than expected, with the Spanish annual rate rising to 2.9% y/y on a seasonally adjusted basis, up from 0.9% y/y in the previous month. Italian production rose 0.4% m/m, which brought the working day adjusted annual rate to 1.5% y/y, after -0.1% y/y in February. Robust numbers that tie in with the improvements in PMIs and shows not only that the Spanish reforms are working, but also that the recovery in the Eurozone is broadening, even if risks remain.
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