Euro extends losses in risk-off markets despite bright German Industrial Production

• EUR/USD retreats below 1.1200 from session highs near 1.1270 on the previous day, hit by risk aversion.
• German Industrial Production beat expectations but failed to lift the Euro.
• Higher demand for safe assets amid the sell-off in equities and solid US data are keeping the US Dollar buoyed.

The Euro (EUR) trades lower for the second consecutive day on Friday, with the US Dollar (USD) favoured by risk aversion amid a tech-led sell-off in equity markets. The EUR/USD pair trades near 1.1180 at the European session opening times, down from highs near 1.1270 on Thursday, unable to take advantage of the positive German Industrial Production released earlier in the day. 

German factory output grew 0.7% in September, according to data released by the German official statistics office, beating market expectations of a flat reading and above August’s 0.1% growth. The main contributors to the improvement were the automotive and the pharmaceutical sectors, while production in construction and machinery and equipment manufacturing declined.

Later in the day, Eurostat will release the Eurozone Retail Sales data for September, which is expected to show a 0.1% decline, reverting August’s 0.1% gain. Barring a positive surprise, these figures are unlikely to provide any significant support to the Euro.

USD shines amid risk-off markets and positive US data

The safe-haven US Dollar has drawn support from the selloff in equity markets led by growing concerns about the AI sector. Chipmaker shares have plunged in the US and Asia, crushed by investors' fears that the Democratic sweep in the United States will result in tougher regulatory requests and cancellations in data-centre construction plans.

Strategists at OCBC argue that the broader environment, with “US growth still solid, inflation sticky and the Fed on track for further tightening (...) remains broadly USD supportive.”  

Against this background, the market has its eyes set in October’s Nonfarm Payrolls (NFP) report, due later on Friday. Previous labour data beat expectations this week; Jobless Claims fell to their lowest level in nearly four months last week, ADP employment increased well beyond consensus in October, and the JOLT report showed sharply higher job openings in September. If the NFP follows this trend, it might provide additional support to the USD.