The steady flow of gloomy economic data continues in Europe and has yet to show any signs of giving way.
Wednesday’s (6 February) German factory orders data were disappointing, as the recorded 1.6% monthly fall leaves orders down 7% on an annualised basis. It comes ahead of the EU's downward revision to growth and inflation forecasts that are expected later this week.
In a note to clients, Kit Juckes, Head of FX at Société Générale, said bund yields are firmly rooted at a measly 16bp and EUR/USD is slipping towards the lower end of its stiflingly small range.
“I'd be surprised if 1.13 doesn't break at some point this week. Of our recommended currencies to buy against the euro, the yen's a bit stronger as bond yields drift lower globally in the wake of Tuesday's soft US non-manufacturing ISM data.”
Away from the EU, US President Donald Trump's State of the Union address didn't suggest that co-operation in American politics is likely, and had little for markets to chew over.
SocGen analysts said they would be looking for EUR/USD to get below 1.13 and in the process, GBP/USD will go in drifting lower. Furthermore, there's no meaningful news on Brexit and that's bad news. The same old un-sealable Brexit deal remains the only one on the table.
“Elsewhere, we still like NOK/SEK and think there's another leg down to come in USD/CAD. And when the current pause comes to an end, the year's primary FX trend, the gradual turn lower by the dollar, should resume. The big challenge will continue to be the dearth of attractive currencies to sell it against,” Juckes concluded.
