Euro drifts lower as investors’ cautiousness offsets upbeat German factory data

The Euro (EUR) shows a moderately negative stance against the US Dollar (USD) on Monday, in a calm start of the week. German Factory Orders figures released earlier on the day beat expectations, but ongoing concerns about the fate of the US-Iran peace process are weighing on risk sentiment and underpinning support for the Greenback.

The EUR/USD pair is trading at the 1.1415 area at the time of writing, after a failure at the 1.1470 area late last week, while the US Dollar Index (DXY), which measures the value of the USD against a basket of six peers, appreciates beyond the 101.00 level, after bouncing from the 100.60 area on Friday.

German factory data, investors' sentiment improve

In the Eurozone, data from Germany beat expectations, with Factory Orders rising 1.9% MoM in May, well above the 1.2% increase expected, partially reversing the 3.2% contraction seen in April. Later on the day, the Sentix Investor Confidence index for July improved to -3.1, its best reading since the beginning of Iran's war and a significant recovery from the -13.4 print seen in June.

Investors’ enthusiasm about these figures, however, has been dampened by fresh concerns about the US-Iran peace deal. On the one hand, Iranian authorities have reiterated their willingness to collect fees from vessels crossing the Strait of Hormuz, a possibility flatly rejected by the US, while on the other, Iran and Israel have escalated their rhetoric, casting shadows about the fate of a fragile ceasefire.

Later on the day, Eurozone’s Producer Price Index (PPI) and Retail Sales data will provide further clues about the region’s economic momentum. In the US, the focus will be on the ISM Services Purchasing Managers’ Index (PMI), which is expected to confirm the picture of a resilient US economy and is likely to frame the speech of Fed Governor Christopher Waller, due later on the day.