The euro fell slightly against the US dollar on Monday and didn’t show much of a reaction to the release of Euro-zone industrial new orders, which rose at the fastest pace in 19 months. New orders jumped by a better-than-expected 3.1 percent in June, bringing the annual rate of growth down to -25.1 percent from -30.3 percent. In general, the manufacturing sector has seen the most improvement in recent months as export demand has risen, but the sustainability of this growth is questionable as it is due, primarily, to various stimulus measures and extraordinarily accommodative monetary policy. Even European Central Bank (ECB) President Jean-Claude Trichet is not confident in the outlook, as he said on Saturday at the Jackson Hole symposium that while he’s seen “some signs confirming that the real economy is starting to get out of the period of freefall,” it doesn’t mean “that we do not have a very bumpy road ahead of us.”
Looking ahead to Tuesday, the final reading of Q2 German GDP shouldn’t be market-moving for the euro, as no revisions are expected. Indeed, the government is anticipated to confirm preliminary estimates showing that the German economy expanded by 0.3 percent during Q2 (seasonally adjusted), the first increase since Q4 2007, and contracted 5.9 percent from a year earlier (working days adjusted), compared to a contraction of 6.7 percent in Q1. The news may only impact the euro if we see revisions, especially given Trichet’s cautious stance.