Germany's Industrial Production outpaces 0% forecast with 0.7% MoM growth in September

Industrial output in the Eurozone’s economic powerhouse outpaced expectations in September, rising 0.7% month-on-month, according to figures released on Wednesday by federal statistics authority Destatis and adjusted for seasonal and calendar effects. Against a forecast of 0%, the increase followed August’s 1.0% gain, revised from 2.0%.

September’s industrial production in Germany was 0.4% higher year-on-year (YoY). This compared with annual growth of 0.7% in August, revised from 2.3%.

Euro: Frequently Asked Questions

Which countries use the Euro, and how widely is it traded?

Used by the 20 European Union countries within the Eurozone, the Euro ranks behind only the US Dollar among the world’s most actively traded currencies. Its share of all foreign exchange transactions stood at 31% in 2022, while average daily turnover exceeded $2.2 trillion. An estimated 30% of all transactions involve EUR/USD, making it the world’s most actively traded currency pair. Next come EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

What role does the ECB play in the Euro’s movements?

Based in Frankfurt, Germany, the European Central Bank (ECB) serves as the Eurozone’s reserve bank, setting interest rates and overseeing monetary policy. Maintaining price stability is the ECB’s principal mandate, whether through containing inflation or supporting growth. Changes in interest rates are its main policy instrument. The Euro generally benefits when rates are relatively high or are expected to rise; the reverse also applies. Monetary policy is decided by the ECB Governing Council at eight meetings each year. The decision-makers comprise the heads of the Eurozone’s national banks and six permanent members, among them ECB President Christine Lagarde.

Why do inflation figures matter for the Euro?

A key economic gauge for the Euro is Eurozone inflation, tracked through the Harmonized Index of Consumer Prices (HICP). An inflation reading above expectations, particularly one exceeding the ECB’s 2% target, requires the central bank to increase interest rates to bring price pressures under control. When the region’s interest rates are relatively high compared with those elsewhere, the Euro usually benefits, as global investors find it more attractive to place their funds in the Eurozone.

Which economic indicators can move the Euro?

By revealing the state of the economy, data releases can move the Euro. GDP, manufacturing and services PMIs, employment figures and consumer sentiment surveys are among the indicators that can shape the single currency’s direction. Economic strength supports the Euro by drawing in more foreign investment. It may also prompt the ECB to raise interest rates, directly strengthening the currency. Weak economic readings, by contrast, are likely to weigh on the Euro. Particular attention is paid to figures from Germany, France, Italy and Spain. These four largest euro-area economies together represent 75% of the Eurozone’s economy.

Why does the Trade Balance matter for the Euro?

The Trade Balance is another important release for the Euro, showing the gap between a country’s export earnings and its spending on imports over a specified period. Strong overseas demand for a country’s exports creates additional demand for its currency as foreign buyers seek to purchase those goods, thereby lifting its value. A positive net Trade Balance therefore strengthens the currency, while a negative balance has the opposite effect.

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