EUR/USD has posted slight gains on Wednesday. In the North American session, the euro is trading at 1.0773, up 0.19%.

German industrial production falls in December

This week’s German data has analysts scratching their heads. Industrial production, released today, declined 1.6% m/m in December, compared to a downwardly revised -0.2% in November and worse than the market estimate of -0.4%. It was the ninth decline in ten months.

Just a day earlier, factory orders surprised with a massive gain in December of 8.9% m/m, compared to the downwardly revised 0% reading which was also the market estimate. This marked the strongest monthly gain since June 2020 as foreign and domestic orders were close to double-digit growth. Manufacturing has been in the doldrums in the eurozone’s largest economy, but the red-hot factory orders report provides hope that better days lie ahead.

Germany’s GDP declined by 0.3% q/q in the fourth quarter, as the economy has been hampered by sticky inflation, high energy prices and weak demand for German exports. The eurozone’s largest economy could tip into a technical recession, defined as two consecutive quarters of negative growth, if first quarter GDP declines as well.

The eurozone is also grappling with a weak economy and retail sales fell 1.1% m/m in December, after a revised 0.3% gain in January and below the market estimate of -1%. This was the sharpest decline in a year, as consumers have been hammered by high inflation and steep borrowing costs, resulting in consumers holding the purse strings more tightly.

The economic picture in Europe is grim but the European Central Bank is still hesitant to embrace rate cuts, as policy makers have voiced concern that inflation could still show a comeback if the ECB cuts rates too early. The ECB will have plenty of time to digest key economic data, with the next meeting on March 7.

.

EUR/USD Technical

• EUR/USD is putting pressure on support at 1.0746. Below, there is support at 1.0704
• There is resistance at 1.0822 and 1.0864

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at [email protected]. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.