Euro rebounds strongly today, boosted by combined effect of strong Germany data and rebound in stocks. Germany factory orders posted strong upside surprise today, showing 4.4% mom gain in May while markets expected a mere 0.5% rise. This was the third consecutive month of expansion and the fastest pace since June 2007. The data argues that German industrial production's deterioration may be coming to an end and worst of recession in the economy has passed. Major European stocks index also recovers mildly from yesterday's loss. Euro takes the lead to rebound against dollar and yen and is followed by strength in Aussie. Canadian dollar is also lifted by strong building permits data which rose 14.8% mom in May even though crude oil remains soft.
On the other hand, Sterling continues to lag behind other major currencies after worse than expected production data from UK. Industrial production dropped -0.6% mom, -11.9% yoy in May versus expectation of +0.2% mom, -11.3% yoy. Manufacturing production dropped -0.5% mom, -12.7% yoy comparing to consensus of +0.2% mom, -11.8% yoy. As mentioned before, Sterling is pressured by speculations that BoE might expand the quantitative easing campaign on Thursday.
RBA left rates unchanged at 3.00% today as widely expected. The statement said that global economy is stabilizing and downside risks have diminished. Economy in Australian is not as weak as expected a few months ago. Nevertheless, the outlook for inflation allows some scope for further easing, if needed. And how the scope might be used will depends on how economic and financial conditions unfold and how they impinge on prospects for a sustainable recovery in economic activity.