It wasn’t a great way to start the week, as German Factory Orders contacted in November. New orders fell by -6.9% MoM and -1.0% YoY, respectively. The weak numbers are a result of health restrictions in Germany, which has been hit by a fourth wave of COVID and is seeing a sharp uptick in the number of cases. Investors shrugged at the weak data, as Germany’s manufacturing sector is in decent shape. The November Manufacturing PMI came in at 57.4, which points to significant expansion. Still, if the pandemic worsens and the government responds with more severe restrictions, manufacturing could lose steam.
Eurozone inflation is running at a 4.9% clip, but some investors have expressed concern that ECB President Christine Lagarde has been too sanguine about the jump in inflation. Lagarde has said that inflation is under control due to temporary factors such as high energy prices, but many market participants are skeptical of her stance. Some ECB members have stated that inflation may not ease as quickly as expected. This view was reiterated last week by Luis de Guindos, vice-president of the ECB. There is growing pressure on the ECB to reduce its monetary stimulus. Still, the upcoming meeting may be a sleeper, with Lagarde signaling that there won’t be any major changes at next week’s policy meeting.
In the US, nonfarm payrolls came out very disappointing, with a reading of 210,000 new jobs. This was nowhere near the consensus of 534,000. The soft reading was cushioned by a sharp drop in the unemployment rate, which fell from 4.6% to 4.2%. This was a result of a household employment report which showed the creation of some 1.1 million jobs. If you’re confused about the conflicting data, no worries – experts are as well. These two employment reports often diverge sharply, and the true state of the labor market lies somewhere in the middle.
- EUR/USD has support at 1.1236 and 1.1163
- The next resistance lines are 1.1383 and 1.1457
