Euro falls further as risk-off sentiment overshadows upbeat German Industrial Production

• Risk aversion pushes EUR/USD below 1.1200, down from the previous day’s session highs near 1.1270.
• Despite exceeding forecasts, German Industrial Production provided no lift to the Euro.
• The US Dollar remains supported by robust US data and demand for safe-haven assets as equities sell off.

Better-than-expected German Industrial Production figures released earlier on Friday have failed to support the Euro (EUR), which is weakening for a second consecutive day. A technology-led equity sell-off has fuelled risk aversion, favouring the US Dollar (USD). At the start of European trading, EUR/USD is hovering around 1.1180, below Thursday’s highs near 1.1270. 

September’s German factory output rose 0.7%, surpassing forecasts for no change and accelerating from August’s 0.1% increase, figures from the German official statistics office showed. Automotive and pharmaceutical production accounted for most of the improvement. By contrast, output fell in construction and in machinery and equipment manufacturing.

Eurostat’s September Eurozone Retail Sales figures are due later in the day. Expectations point to a 0.1% fall, reversing the 0.1% rise recorded in August. Unless the release delivers an upside surprise, it is unlikely to offer the Euro much support.

USD gains support as risk appetite weakens and US data hold firm

Mounting unease over the AI sector has driven an equity sell-off, benefiting the safe-haven US Dollar. Shares in chipmakers have slumped across the US and Asia as investors fear that the Democratic sweep in the United States will bring tougher regulatory requirements and the cancellation of data-centre construction plans.

In the view of OCBC strategists, the wider backdrop, with “US growth still solid, inflation sticky and the Fed on track for further tightening (...) remains broadly USD supportive.”  

Attention now turns to October’s Nonfarm Payrolls (NFP) report, scheduled for release later on Friday. Labour market releases have exceeded expectations this week: last week’s Jobless Claims dropped to their lowest in nearly four months, October’s ADP employment increase far outstripped consensus, and the JOLT report recorded a sharp rise in September job openings. A similar outcome for NFP might give the USD further support.