What is driving the Euro up despite the disappointing Eurozone data?

The Euro (EUR) maintains its positive tone against the US Dollar (USD) on Monday, with the EUR/USD pair trading near 10-day highs above 1.1600. The positive market sentiment amid the US-Iran peace deal and the lower Oil prices has offset the weak Eurozone Industrial Production and Trade Balance data seen earlier on the day.

Factory output grew at a mere 0.1% pace in the Eurozone in April, according to data by Eurostat,  down from an upwardly revised 0.4% reading in March and below the 0.3% growth expected by the markets. Beyond that, the Trade Balance shifted to a EUR 1 billion deficit, from a nearly EUR 5 billion surplus in March, also against the market consensus of a EUR 7.8 billion positive balance.

Iran peace hopes boost risk appetite

The impact of these figures on the Euro, however, has been limited. Investors’ appetite for risk remains strong amid reports that Washington and Tehran reached a memorandum of understanding that will end a three-month war and allow for the reopening of the key Strait of Hormuz. Brent Oil prices have dropped by nearly $4 from last week’s closing levels, hitting fresh three-month lows right above $82.00 and easing some pressure on the Crude-importing Eurozone economies.

Also on Monday, European Central Bank (ECB) policymakers Martins Kazaks and Joachim Nagel have shown their concerns about the ongoing inflationary pressures, feeding hopes of further monetary tightening. These comments have provided additional impetus to the Euro.

In the US, Industrial Production and the New York Federal Reserve’s (Fed) Manufacturing Index will reclaim some attention later on the day, although the highlight of the week will be Wednesday’s Fed decision. The bank is widely expected to leave interest rates on hold, but investors will have the central bank’s interest rate and economic projections and the first press release of Kevin Warsh as the bank’s chairman to assess changes to the bank’s guidance under the new chief.