Euro falls further in risk-off trading despite upbeat German Industrial Production

• EUR/USD falls below 1.1200. Risk aversion pulls the pair back from the previous day’s session highs near 1.1270.
• Despite exceeding forecasts, German Industrial Production offered no lift to the Euro.
• Solid US figures and a shift into safe assets during the equity sell-off continue to support the US Dollar.

EUR/USD trades near 1.1180 as the European session opens. The Euro (EUR) is heading lower for a second consecutive day on Friday, retreating from Thursday’s highs near 1.1270. A tech-led equity sell-off is driving risk aversion and demand for the US Dollar (USD), leaving the pair unable to benefit from encouraging German Industrial Production figures published earlier in the day. 

September factory output in Germany rose 0.7%, the German official statistics office reported. That exceeded forecasts for no change and August’s 0.1% increase. 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. Forecasts point to a 0.1% contraction, reversing August’s 0.1% rise. Without an upside surprise, the release is unlikely to offer the Euro meaningful support.

USD gains on risk aversion and firm US figures

Mounting anxiety over the AI sector has fuelled an equity sell-off, benefiting the safe-haven US Dollar. Across the US and Asia, chipmaker shares have slumped as investors fear the Democratic sweep in the United States will bring stricter regulatory requirements and cancellations of data-centre construction plans.

In the assessment 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 earlier this week surpassed expectations. Last week’s Jobless Claims dropped to their lowest in nearly four months, while October’s ADP employment increase substantially exceeded consensus. The JOLT report also recorded a sharp rise in September job openings. A similar outcome in NFP might give the USD further support.