The euro posted gains in early European trade Monday, helped by signs of a German economic recovery and well as hopes of more stimulus for the region in the near future. At 3 AM ET (0700 GMT), EUR/USD gained 0.4% to 1.1294, while EUR/GBP climbed 0.3% to 0.9032.
German factory orders rose 10.4% in May with demand rebounding after the country loosened restrictions to contain the spread of the coronavirus, adding to evidence that Europe’s economy is starting to recover.
“After two devastating months, today’s increase is the largest monthly increase ever,” said analysts at ING, in a research note, although “even after today’s increase, order books are some 30% below the first quarter levels.” “Today’s industrial orders data brings two important messages: the lifting of the lockdown measures has brought V-shaped surges in activity but the return to pre-crisis levels will not be easy,” the bank added.
With this in mind, the market will be looking out for any new signals on the region’s recovery fund from the meeting of euro area finance ministers on Thursday, before the July 17-18 summit of the region’s leaders.
Germany, Europe’s economic powerhouse, will be very keen to arrange a consensus about the structure of the Covid-19 recovery fund as it now has the six-month rotating presidency of the European Union. Elsewhere, the dollar index, which tracks the greenback against a basket of six other currencies, was 0.5% lower and heading toward a two-week low at 96.852. GBP/USD rose 0.2% to 1.2504, while USD/JPY was up 0.1% at 107.64.
The dollar was down on Monday, with investors leaving the safe-haven asset amid optimism over U.S. services sector activity data for June due later in the day.
Forecasts prepared by predict a reading of 50 for the Institute for Supply Management non-manufacturing purchasing manager’s index.
“ISM non-manufacturing is going to be very interesting, especially after the ISM manufacturing index rose above 50,” said analysts at Danske Bank, in a research note. “However, we see an increasing risk that we may see a setback in the gradual recovery in July and August due to the virus outbreaks in large states like California, Texas and Florida, which have led to local lockdowns.”
The World Health Organization reported the highest number of cases over a 24-hour period, with the U.S. registering over 150,000 new cases over the long holiday weekend.
Additionally, the AUD/USD pair gained 0.6% to 0.6979, helped by rising prices for Copper and other export commodities. The Reserve Bank of Australia will meet on Tuesday for its policy meeting and is expected to keep its key rate at 0.25%.