Daily Economic Commentary: Euro zone

[PipDiddy]

No news is good news! Well, at least for the euro it was! Without any new updates on the Europeans debt crisis to worry investors, the euro was able to stage a relief rally against its major counterparts. EUR/USD rose 144 pips to climb above the 1.4500 handle while EUR/JPY gained 56 pips to finish above 113.00.

With the markets distracted by concerns over the U.S. debt ceiling, the euro sneakily stole some pips across the charts. It also helped that spreads in the EU are finally signs of stability.

As for yesterday's lone report, well, it wasn't much of a market-shaker. The German GfK consumer confidence index crept down from 5.6 to 5.4 as the debt crisis bogged down consumer sentiment and overall willingness to buy in July.

Today, we have German preliminary CPI data on tap. Now, I wouldn't advise you to trade the news with this report as this probably won't do much to move the euro. But it would be wise to take note of it as a high German CPI could lift the euro zone-wide CPI. Look for inflation in Germany to rise from 0.1% to 0.3% in the month of July. Good luck, kids!

[sohcomey]

thanks pipdiddy

[PipDiddy]

Geronimoooo! The euro plunged in the charts yesterday as risk aversion swept the markets and sent higher-yielding currencies lower. EUR/USD closed 141 pips lower at 1.4374 while EUR/JPY ended the day down to 112.11 from its opening price of 113.09.

Although the U.S. debt ceiling continued to dominate headlines, Europe’s problems also didn’t escapre investors’ attention. Standard and Poor’s downgraded Greece’s credit rating from CCC to CC and issued a negative outlook. They even warned that investors may only get back probably around 30% to 50% of their investments. Yikes!

Perhaps all the gloom-and-doom talks were too much for investors to handle. Heck, the Dow Jones even plunged almost 200 points yesterday!

On the economic front, we saw mixed numbers from Germany which did very little to help the euro. German import prices for July declined by 0.6% and disappointed the consensus which was for it to remain flat. Meanwhile, the country’s preliminary CPI report showed that inflation rose by 0.4% and beat the forecast by 0.1%.

Today only the jobs report from Germany for June is on tap at 7:55 am GMT. Analysts are expecting to see that the change in the number of unemployed people totaled to 15,000 while the unemployment rate is seen to have remained steady at 7%.

Aside from that, make sure you get a good feel of market sentiment and gauge which direction the euro is headed. Keep in mind that it usually rallies when risk appetite picks up.

[PipDiddy]

It was just one of THOSE days for the euro. Once again, it came under selling pressure as weak economic data and European debt concerns bogged down the shared currency. While EUR/USD slid 65 pips, EUR/JPY fell 84 pips, finding support at the 111.00 handle.

The markets have been abuzz with U.S. debt ceiling talks, but yesterday, they showed that they haven't quite forgotten about the EU's own debt problems. Disappointing results from Italy's bond auction pushed Italy credit default swap spreads higher, indicating that the markets are as jittery as ever even with Greece receiving a second bailout. After all, Greece may be in the clear for now, but Italy is still not out of the woods. Hmm... This makes me wonder: Is there anything the ECB can do to ease fears?

As for yesterday's lone economic report... well, the German employment data was just as disappointing! The number of unemployed people slid by 11,000 in July, which is not quite the 15,000 decline that markets were expecting to see. German unemployment has dropped for 25 straight months now, but we're starting to see signs of it hiring slowing, which means that maybe employment is nearing its peak in Germany.

Up ahead, we've got a few tier 2 reports coming our way. At 6:00 am GMT, German retail sales (1.6% forecast vs. previous -2.8%) will be available. A few moments after that, at 6:45 am GMT, French consumer spending data (0.4% forecast vs. previous -1.5%) will be out. And last but not least, at 9:00 am GMT, we'll have euro zone CPI (2.7% forecast vs. previous 2.7%) on tap. But remember, the U.S. is also due to roll out its GDP report today. Don't get blindsided by that market-mover! Good luck kids!

[PipDiddy]

Topsy-turvy day for the euro last Friday, as EUR/USD dropped at the start of the London session, but soon recovered on broad USD weakness during the New York session. The pair bottomed out at 1.4229, before bouncing up and closing 1.4365, up 58 pips for the day.

So what caused the euro to drop?

While German retail sales came in four times expectations and indicated sales growth of 6.3% last month, the euro zone CPI flash estimate showed inflation to be at 2.5%, less than the projected 2.7% yearly inflation. While this is still above the ECB’s mandated inflation rate, it does lessen the pressure for the ECB to raise rates sooner. And of course, everyone and everyone’s grandmamma knows what lowered rate expectations mean – less reason to buy the euro!

The other major reason why the euro dropped initially was that Moody’s put Spain’s Aa2 credit rating on negative watch! Dios mio! Naturally, this led to a euro sell off as debt contagion fears haven’t exactly left the market.

For today, the only report of important from the euro zone is the region wide unemployment report, which will be available at 9:00 am GMT. Word is that the unemployment rate is still hovering around 9.9% and with the markets concerned about the U.S. debt ceiling, I don’t think this will be too much of a market mover.

Looking ahead, the biggest mover for the euro this week will most likely be Thursday’s ECB monetary policy statement. With everything that’s going on right now, it’ll be interesting to see what ECB President Jean Claude Trichet has to say!

[PipDiddy]

Not again! No thanks to risk aversion, the euro took a major hit in yesterday’s trading session. After it had hit an intraday high at 1.4450, EUR/USD dropped like a rock to close the U.S. trading session at 1.4258. All in all, the pair lost 126 pips yesterday.

The market’s aversion to risk was the result of traders’ unease over the debt deal. While the Congress and Obama were able to reach a tentative agreement over the debt deal, the market still remained cautious over the financial condition of the U.S.

The deal also didn’t mean that the U.S. sovereign credit rating wouldn’t get cut by credit rating agencies. Sometimes, it baffles me how the market can still buy the currency of a debt-laden country… but I guess that’s just how the market works!

Today, the only piece of data coming out of euro zone is the producer price index. Scheduled to come out at 9:00 am GMT, the PPI is expected to show a 0.1% gain, opposite the 0.2% decline seen the month before.

[PipDiddy]

Another down day for the euro, as risk aversion continued to dominate the markets. EUR/USD dropped 50 pips to finish at 1.4208. Meanwhile, EUR/CHF made yet another all-time low, falling nearly 200 pips to close at 1.0876! Mama mia! What’s going on?!

Yields on Italian and Spanish debt have continued to rise even after Greece received another bailout, indicating that investors are still wary of the European situation. I fear that this could be a recurring theme over next few weeks, and don’t be surprised if we start hearing that another country (ahem, Spain, ahem) may require a bailout as well.

The euro also took a hit thanks to poor PPI figures, which came in flat after expectations were for a small increase of 0.1%. Remember, this is a leading indicator of inflation and if prices aren’t rising, it gives the ECB less reason for another rate hike.

Looking at our fabulous economic calendar, I see that we’ve got euro zone wide retail sales data coming in at 0.5%. Word through the forex grapevine is that sales rose a decent 0.5% this past June, which would be a nice turnaround from the 1.1% drop we saw the month before. Should the report come in better-than-expected, it could give the euro enough juice to stay afloat in today’s trading sessions.

[PipDiddy]

It’s about time! Thanks to positive data, the euro was able to bag 111 pips from the dollar for the first time this week yesterday when it closed higher at 1.4319. It was also able to end its 5-day losing streak against the yen when EUR/JPY closed the day 68 pips higher at 110.21.

Yesterday we saw an upward revision to the euro zone’s final services PMI to 51.6 after being reported at 51.4. But what made the euro bulls’ day was the retail sales report for June which printed a 0.9% uptick and topped the market’s expected 0.5% forecast. Apparently, the surge in consumer spending was led by Germany.

I wonder if the German economy would continue to impress markets today when it releases its factory orders report for June which is expected to print a 0.4% decline later at 10:00 am GMT. However, I don’t think that the data would be the primary driver in the euro’s price action in today's trading.

At 11:45 am GMT, the ECB will announce its interest rate decision. Although no one is expecting ECB head honcho Jean-Claude Trichet to holler an interest rate hike, that doesn’t mean you can just forget about it!

Make sure you stick around your charts around 12:30 pm GMT when he takes center stage for the press conference and keep an ear out for what he has to say.

As Forex Gump mentioned in his article last Saturday, recent disappointment in economic data may give the ECB a reason to sound dovish while increased inflationary pressures could be enough for Trichet to say that the bank would show “strong vigilance” against inflation.

Just remember to be careful, ayt? Good luck y’all!

[PipDiddy]

Eur[o] going dooown! No thanks to the ECB’s statements yesterday and the persistence of risk aversion in markets, the euro fell sharply against its major counterparts. EUR/USD dropped by a solid 206 pips to 1.4122, while EUR/CHF also fell by 175 pips. Meanwhile, the BOJ’s currency intervention dragged EUR/JPY to an intraday high of 114.18.

Too bad the euro bulls didn’t have a chance! Though Germany printed a better-than-expected factory orders data, the ECB’s interest rate statement and press conference blocked out the optimism that the region would recover from its debt crisis anytime soon.

Aside from holding its interest rate steady at 1.50%, the ECB announced its plans to buy more bonds from financially-troubled euro zone nations. What’s more, the ECB also acknowledged that economic uncertainty had increased over the last few weeks. I don’t know about you, but those statements have “dovish” printed all over them!

Let’s see if the euro manages to trim some of its losses today when Italy releases its GDP report at 9:00 am GMT, which will be followed by Germany’s industrial production report at 10:00 am GMT. Of course, we all know that the markets will pay special attention to the U.S. NFP report coming out at 12:30 pm GMT, so y’all better watch out for it! If the report sparks a heavy round of risk aversion, then we just might see the euro fall deeper in the charts!

[PipDiddy]

The euro pulled off an R. Kelly move against the dollar last Friday as it bounced-bounced, bounced-bounced off support at the 1.4100 handle. It was able to pare some of its losses when it ended the week 159 pips above the day open at 1.4122.

Although we had a few reports from the euro zone, I think a large part of the euro’s win was because of concerns over a U.S. debt downgrade.

It was reported that the French trade deficit for June was smaller at 5.6 billion EUR than the 6.3 billion EUR forecast. We also saw that the Italian economy grew by 0.3% in Q2 2011 and beat the consensus which was for a 0.2% in the GDP report.

On the other hand, the German industrial production report for June showed a 1.1% decline and disappointed the market forecast which was for a 0.1% uptick.

Now that the fears of investors have already been confirmed when S&P downgraded U.S. debt, will we see the euro rally up the charts?

Maybe. However, we have to keep in mind that problems in Italy and Spain are still there. Just be on your toes for any changes in market sentiment, ayt?

Also keep tabs on the Sentix investor confidence report for August due at 8:30 am GMT. Analysts are anticipating the report to come in at 3.6. Watch out for the actual figure as it may give investors one more reason to buy (or sell) the euro!