Surprising strength in Eurozone industrial orders along with overall weakness in the US dollar has helped to trigger an upside breakout in the EUR/USD today. Despite the prior strength of the Euro, industrial orders increased 4.4 percent in the month of June, which was the largest increase in 18 months. The current account also jumped back into positive territory after dropping the prior month. The final release of second quarter GDP is the only piece of data on the Eurozone calendar tomorrow.
The market has a pretty good grasp of what the Fed may do in Septemberand now it is just a matter of figuring out what the European Central Bank will do. The best case scenario for the health of the European economy would be if the ECB stands pat, but that may not be the best outcome for the Euro. The lack of comments from ECB President Trichet in recent days suggest that he is digesting the recent moves in the credit markets just like the rest of us and will probably be basing his decision on whether the markets stabilize. Meanwhile Switzerland has trade balance and employment data out tomorrow. Swiss data has had the habit of surprising to the downside, but that has not mattered to a market still focused on carry.