Factory orders weigh on euro

The euro is off versus the US dollar after the latest producer price index missed expectations.

The eurozone’s PPI report, which measures the change in the price of factory orders, was unchanged in September, when analysts were expecting an increase of 0.1% on the month. Year-on-year there was an increase of 1.1%.

The European Central Bank would like to keep PPI inflation around the 2% level, estimating that the CPI inflation rate for the eurozone will be between 1.4% and 1.6%. A certain amount of inflation is needed for an economy but when prices are sliding it is an indication that demand is softening.

The first Friday of the month is usually when the US non-farm payrolls and unemployment reports are announced, but due to the partial shutdown in the US over the budget deadlock, neither will be reported today.

At 2.15pm (London time), William Dudley of the Federal Reserve is due to make an announcement. Mr Dudley is on the dovish side of the divide when it comes to monetary policy, so he is likely to be in favour of keeping the stimulus package in place. This could drive the euro higher versus the US dollar.

Spot FX EUR/USD chart

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