Germany’s Factory Orders miss 4.8% estimates despite 4.4% rise in September

Manufacturing activity in Germany appeared to gather momentum in September, with a rise in Factory Orders, according to official figures released by the Federal Statistics Office on Thursday.

Following August’s 10.1% decline (revised from -10.6%), orders for goods ‘Made in Germany’ rebounded by 4.4% month-on-month in September. The increase fell short of the 4.8% forecast.

On a year-over-year (YoY) basis, Germany’s Factory Orders increased by 3.3% in September, compared with the preceding rise of 3.2% (revised from 2.7%).

Euro: Frequently Asked Questions

Which countries use the Euro, and how widely is it traded?

Used by the 20 European Union countries that make up the Eurozone, the Euro ranks second only to the US Dollar among the world’s most traded currencies. Its share of all foreign exchange transactions stood at 31% in 2022, with average daily turnover exceeding $2.2 trillion. An estimated 30% of all transactions involve EUR/USD, making it the world’s most traded currency pair. Next come EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

What role does the ECB play in determining the Euro’s value?

Based in Frankfurt, Germany, the European Central Bank (ECB) serves as the Eurozone’s reserve bank, setting interest rates and conducting monetary policy. Maintaining price stability is the ECB’s main mandate, requiring it either to contain inflation or to support growth. Adjustments to interest rates are its principal policy instrument. The Euro generally benefits when interest rates are relatively high or expected to rise; the reverse also holds. Monetary policy is decided by the ECB Governing Council at eight meetings each year. The decision-makers comprise the heads of the Eurozone’s national banks and six permanent members, among them ECB President Christine Lagarde.

Why do inflation figures matter for the Euro?

For the Euro, a key economic measure is Eurozone inflation, tracked through the Harmonised Index of Consumer Prices (HICP). An increase in inflation beyond expectations, particularly above the ECB’s 2% target, obliges the central bank to raise interest rates to bring price pressures under control. When interest rates in the Eurozone are relatively higher than those elsewhere, the Euro usually benefits because the region becomes a more attractive destination for global investors’ funds.

What can economic releases signal for the Euro?

The Euro can respond to economic releases because they provide a reading of the economy’s health. GDP, Manufacturing and Services PMIs, employment figures and consumer sentiment surveys are among the indicators that can shape the single currency’s direction. Economic strength supports the Euro by drawing in more foreign investment and potentially prompting the ECB to raise interest rates, which would directly strengthen the currency. Weak economic figures, by contrast, are likely to weigh on the Euro. Particular attention is paid to releases from Germany, France, Italy and Spain. As the euro area’s four largest economies, they together represent 75% of the Eurozone’s economy.

Why does the Trade Balance matter for the Euro?

The Trade Balance is another important release for the Euro, showing the difference between a country’s export earnings and its expenditure on imports over a specified period. Strong overseas demand for a country’s exports creates additional demand for its currency as foreign buyers seek to purchase those goods, lifting the currency’s value. A positive net Trade Balance therefore supports a currency, while a negative balance has the opposite effect.

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