Europe's Industrial Rebound Leaves Euro-Dollar Well Poised: CIBC

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Strong industrial and GDP data bolster euro exchange rate outlook.

The euro to dollar exchange rate (EUR/USD) trades at 1.1650, holding a weekly gain of half a per cent, with supportive updrafts coming from bloc data releases.

Germany is finally seeing a lift, with October factory orders printing at 1.5% in October said Destatis, five times the level assumed by the market (0.3%), and the September reading was revised from 1.1% to 2.0%.

And French industrial production is getting in on the act, exceeding expectations with a rise of 0.2% against a forecast decline of 0.1%. Spanish output gained 0.7%, beating the 0.5% consensus.

"The uptick in real economy data, we would expect similar impetus in German industrial output on Monday, suggests underlying EUR/USD resilience," says Jeremy Stretch, FX strategist at CIBC Capital Markets.

At 1.1650, EUR/USD is on course for a second consecutive weekly advance, having been as low as 1.15 just last week.

"We anticipate strong seasonal trends, EUR/USD has climbed in seven of the last eight years, leaving EUR/USD remaining well supported," says Stretch.

Underscoring a firm fundamental footing, the Eurozone also reported GDP data, showing the economy grew 0.3% quarter-on-quarter in Q3, surpassing estimates of 0.2%.

Employment also grew by a comfortable 0.2%, exceeding estimates of 0.1%.

All this points to a firming economic pulse that puts the European Central Bank (ECB) on a firm and extended hold.

In a world where interest rates matter, this leaves the euro well poised for further gains against a dollar that will be subject to a series of rate cuts at the Federal Reserve, starting next week.

"We maintain a mostly constructive view on EUR into next year," says Bank of America. "We forecast EUR-USD at 1.22 by end-26."