Investing.com - The euro pushed higher against the dollar on Monday, easing back from a two year trough as the dollar paused following its recent run higher, but gains were held in check following the release of weak German factory data.
EUR/USD was up 0.35% to 1.2558, pulling away from Friday’s two year trough of 1.2499.
Demand for the dollar continued to be underpinned after Friday’s stronger-than-forecast U.S. jobs report fuelled expectations that the Federal Reserve could raise interest rates in the middle of next year.
The U.S. economy added 248,000 jobs in September, well ahead of forecasts for jobs growth of 215,000, the Labor Department said. The unemployment rate ticked down to 5.9%, the lowest level since July 2008.
Diverging monetary policy expectations have boosted the dollar against the euro in recent months, with the European Central Bank likely to stick to a looser monetary policy stance amid concerns over deteriorating inflation expectations.
The ECB refrained from implementing additional stimulus measures at its meeting last week, indicating that it will wait to see the effects of recent stimulus measures on the region’s economy.
Data on Monday showed that German factory orders fell 5.7% in August, compared to expectations for a 2.5% decline. It was the largest drop since early 2009, adding to concerns over the outlook for third quarter growth.
The report came on the heels of data on Friday showing that the euro zone service sector slowed more sharply than initially estimated in September, fuelling fears that the economy is losing momentum.
The US Dollar Index, which tracks the performance of the greenback against a basket of six major currencies, was down 0.36% to 86.47, off Friday’s four-year peaks of 86.79.
It notched up its twelfth consecutive weekly gain last week, the longest rally since the index was created in 1971.
Elsewhere Monday, the euro was slightly lower against the yen, with EUR/JPY dipping 0.11% to 137.23.