Germany, Eurozone’s manufacturing powerhouse, will publish Industrial Production data for April at 06:00 GMT.
The output is seen contracting by 15.5% month-on-month, having fallen by 9.2% in the previous month. The annualized figure plunged 11.6% in March.
German factories: Not out of the woods yet
The downturn in Germany’s manufacturing sector deepened in April, as suggested by the latest German Factory Orders data. Contracts for goods ‘Made in Germany’ collapsed 25.8% on the month vs. -19.7% expected and -15.6% last.
Meanwhile, IHS Markit’s German Purchasing Managers’ Index (PMI) for Manufacturing, which accounts for about a fifth of the economy, was revised downwards to 36.6 in May from the preliminary reading of 36.8, despite it improving slightly from April’s 34.5.
As a result, the possibility of Germany’s industrial production undermining estimates cannot be ruled out.
Impact on EUR/USD
EUR/USD is extending its post-US NFP downside consolidation below 1.1300 into Europe this Monday, having made a failed attempt above the latter in early Asia. The US dollar continues to draw bids across its main competitors on account of an unexpected jobs addition to the US economy in May. Meanwhile, stabilizing risk-on sentiment amid fresh coronavirus and trade war fears underpin the dollar bulls.
An upbeat Germany’s industrial production for April could likely help revive the buying interest around the shared currency, which could send EUR/USD back towards 1.1350.
On the other hand, if the data shows a bigger-than-expected slump, the spot could extend the corrective mode from three-month highs of 1.1384 to post-NFP lows of 1.1279. Further south, the 1.1250 psychological level could be put to test.
About German Industrial Production
The Industrial Production released by the Statistisches Bundesamt Deutschland measures outputs of the German factories and mines. Changes in industrial production are widely followed as a major indicator of strength in the manufacturing sector. A high reading is seen as positive (or bullish) for the EUR, whereas a low reading is seen as negative (or bearish).