Daily Economic Commentary: Euro zone

[PipDiddy]

With risk appetite up, the euro became hotter than the south of Spain in Friday's trading. The shared currency traded higher against most of its counterparts, with EUR/JPY up 24 pips for the day and EUR/USD closing 69 pips above its opening price at 1.3270.

There weren't any market-moving reports from the euro zone on Friday. This leads many to believe that the euro was able to rally thanks to the pullback in bond yields. Remember that the currency got sold off earlier on in the week as Spanish and Italian bond yields trickled higher, signaling that investors are jittery about the financial situations of the two countries.

With that said, be sure to keep tabs on bonds. A lot of market junkies think that the euro will take its cue from bond yields this week as well.

On top of that, be sure you're also on your toes for economic reports coming from the region. Keep in mind that part of the reason why the euro got sold off last week was because of disappointing data from the euro zone. So don't miss the German Ifo Business Climate index due later at 9:00 am GMT which is eyed to come in at 109.7.

A better-than-expected figure may just spur the euro into a rally so watch out!

[PipDiddy]

Looks like the euro bulls aren’t done partying just yet! Thanks to a surprisingly strong German data and a rally in risk appetite, the euro was able to post more gains against its counterparts yesterday. EUR/USD rocketed from a low of 1.3192 to its 1.3359 closing price, while EUR/JPY posted a 126-pip gain at 110.62.

The German business Ifo climate report got the ball rollin’ yesterday when it printed a 109.8 reading for the month of March. Okay, its increase from February’s 109.7 figure isn’t too impressive, but it was enough to impress traders who were betting that German businessmen would be more pessimistic in March.

Big Ben Bernanke fueled the euro bulls’ fire when he hinted that the Fed would remain accommodative longer than analysts believed. His dovish comments spooked many dollar bulls, which turned out positive not only for the euro but also for the other high-yielding currencies.

Will the euro bulls get excited enough to push EUR/USD above 1.3400 today? At 7:00 am GMT we’ll see the GfK German consumer climate come out together with the German import prices. Germany’s consumer climate is expected to improve in March, while the import prices is projected to drop slightly in February.

Make sure you keep close tabs on bond yields too, aight? I hear that Spanish bond yields finally let up a little yesterday. If euro zone bond yields continue to edge lower today, then we might see more euro-buying in our charts!

Peace out, homies!

[PipDiddy]

It seems like euro bulls took a breather yesterday after their strong rally on Monday. EUR/JPY ended the day almost unchanged at 110.75 after opening at 110.62. Meanwhile, EUR/USD closed with a 38-pip loss at 1.3321.

We didn't get any market-moving reports for the euro. However, we did have a few tidbits of both good and bad news yesterday.

On the not-so-good side of things, Spanish bond yields crept higher following an upward revision to the country's 2012 deficit target from 4.4% to 5.3% of its 2012 GDP. 6-month Spanish Treasury bond yields were up at 0.836% after the auction yesterday from 0.764% in February.

The GfK German Consumer Climate index for March might have also weighed on the euro, disappointing the 6.2 forecast when it printed at 5.9.

Fortunately for the shared currency, there were also positive news from the region that limited its losses. Portuguese bond yields, unlike Spain's, declined to a full percent since the start of March. Word around the hood is that speculations about an increase in the size of the EFSF and ESM have somehow calmed investors and kept bond yields down.

However, we'd have to wait until after the Euro zone finance ministers meeting this weekend to confirm the rumors.

Until then, be sure you keep tabs on reports from the region. Today, we have the money supply report at 8:00 am GMT. An increase of 2.5% is expected in the total amount of euros in circulation. Then at 12:00 pm GMT, the German preliminary CPI report for March is eyed at 0.3%.

Better-than-expected figures may just boost the euro, so be sure you're on your toes!

[PipDiddy]

EUR/USD went on a wild see-saw ride yesterday. During the Asian session, the pair rallied strongly as a result of the leftover dollar weakness from the previous day. However, the move proved to be unsustainable and the pair quickly dropped like a rock once the European trading session began. EUR/USD, at the end of the day, was trading at 1.3320, just a pip lower from its opening price.

On the economic front, we saw mixed data come out. The German Preliminary Consumer Price Index came in as expected at 0.3%. Meanwhile, the M3 Money Supply y/y printed a 2.8% gain, much higher than the 2.5% increase initially predicted.

Today, only one report is scheduled to come out. At 7:55 am GMT, Germany’s unemployment change will publish. It is slated to show that the number of jobless people decreased by 10,000 in February. We might see the euro pop up slightly if the results come in better than expected.

[PipDiddy]

Thanks to the slightly optimistic market environment, the euro was able to post some nice gains last Friday. After it had fallen below 1.3300 the day prior against the dollar, the euro rallied slowly to close the trading week at 1.3337. All in all, the euro was up 42 pips against the dollar for Friday.

Data release wasn't as positive though. The German retail sales report came in with a 1.6% decrease, opposite the 0.5% gain initially expected. It was also a far cry for the 0.1% increase (revised up from -1.4%) from the previous month's figure.

This week, the only major event scheduled is the European Central Bank (ECB)'s interest rate decision. The market widely expects the central bank to keep changes unchanged at 1.00% like 4 meetings.

The ECB is also anticipated to simply reiterate what it had said in the last meeting - economic growth will be probably be around -0.5% to 3.0% for this year. Still, watch out for any surprises! If the ECB deviates from the market's expectation, we could see some wild moves on the euro! The actual announcement will happen on Wednesday, at 11:45 pm GMT.

[PipDiddy]

The euro zone’s PMI reports came up short against the other manufacturing data from other economies yesterday, which is probably why the euro also lost against its major counterparts. EUR/USD slid by 33 pips to 1.3328, while EUR/JPY plunged by 158 pips to 109.37.

The euro zone’s final manufacturing PMI came in at 47.7 in February, its tenth consecutive month at the contractionary level. Apparently, investors are worried that weaker-than-expected manufacturing surveys from Germany and France are reaching the weaker peripheral countries.

Of course, the other data released from the region weren’t any help either. Italy’s monthly and quarterly unemployment rate missed expectations, while the euro zone’s jobless rate surged to a 14-year high at 10.8% Yikes!

The euro zone only has the final GDP and PPI numbers scheduled today at 10:00 am GMT, so we might have to look for other reports that might influence appetite for the common currency. Stick to the news wires, will ya?

[PipDiddy]

Another one bites the dust! Like most currencies, the euro took a big hit against the dollar as the Fed softened its stimulus stance, leading EUR/USD to slide 96 pips to 1.3232.

The euro zone's final GDP fell in line with expectations, which isn't exactly good news since forecasts set the bar low at a growth of -0.3%. Meanwhile, the PPI report came in slightly stronger than expected, clocking in an increase of 0.6% in the price of finished goods and services sold by producers, rather than the 0.5% uptick that was forecasted.

Later, we'll have more numbers to look at as the euro zone is set to publish retail sales data at 9:00 am GMT. Look for the report to show a 0.1% increase, which is slightly lower than the 0.3% uptick we saw in January. Also, the German factory orders data is due at 10:00 am GMT and is slated to print a 1.2% increase, up from -2.7% the previous month.

But enough about these reports. Today, the markets will be focused on the ECB's big interest rate decision, which is due at 11:45 am GMT. Though no one really expects the central bank to hike rates, market junkies will be listening in closely for clues as to what the ECB may do next. Some say policymakers are already starting to discuss an exit strategy.

Anyway, if you want to learn more about what to expect from the ECB rate statement, I suggest you take a look at Forex Gump's most recent article. He cooked up a solid piece which discusses 3 reasons why the ECB will hold its ground. It's a must-read for anyone trading the euro today! Good luck and happy pipping!

[PipDiddy]

After four straight days of losses, the euro avoided a clean sweep versus the dollar as it pared some of its losses. EUR/USD finished 34 pips above its opening price to finish at 1.3099. Can the euro build on Friday’s success or will the bearish run continue?

Thanks to worse-than-expected NFP results, we saw higher yielding currencies like the euro take advantage and edge ahead. Make sure to drop by my U.S. commentary for more insight on the U.S. labor market and how it affected the forex markets!

Take note that France and Germany will still be off on holidays today, so we may not see much movement in the markets. Of course, you never know what might hit the markets and given that we’ll have some thin liquidity, we may see some exaggerated moves. Be careful out there homies!

[PipDiddy]

Talk about starting the week right! The euro edged slightly higher than the Greenback and the Japanese yen in Monday's trading as risk appetite improved in the markets. EUR/USD managed to find support around the 1.3050 level before closing at 1.3114 while EUR/JPY ended 3 pips higher than the 107.00 handle.

Although the euro zone didn't release any economic reports yesterday, the euro was able to benefit from the risk rallies spurred by China's better than expected inflation data. Another factor that propped up the euro against the U.S. dollar was last week's dismal U.S. NFP figure, which triggered fears of another round of quantitative easing from the Fed.

Today, only a few medium-tier reports are set for release from the euro zone. First up is the German trade balance which is expected to show that the surplus narrowed from 14.2 billion EUR to 13.6 billion EUR in February. A weaker than projected figure could highlight a slowdown in German exports, which might be negative for the euro.

Next up are the French industrial production data and euro zone Sentix investor confidence figure due 6:45 am GMT and 8:30 am GMT respectively. Industrial production in France, euro zone's second largest economy, is expected to print a 0.2% uptick while the Sentix investor confidence for the entire region could climb from -8.2 to -7.7.

Better keep an eye out for those releases because they could dictate where the euro will be headed today. Bear in mind that weak figures could undermine the euro's resilience and push EUR/USD to test the 1.3000 handle while strong results could allow the euro to go for more gains. Stay on your toes!

[PipDiddy]

DJ euro got booed off the stage yesterday, as the shared currency simply couldn’t get its groove on. EUR/USD fell 32 pips to finish at 1.3081, while EUR/JPY simply tanked, dropping 152 pips to close at 105.51.

So what caused the euro’s demise today?

Risk aversion took over the markets like a Kanye West single, as Spanish yields on 10-year bonds soared to above 6%. This bought yields to its highest level since late last year. Take note that many investors consider Spain to be next in line for a bailout and rising yields only give credence to those fears.

In other news, we got mixed economic data, as French industrial production figures came in better-than-expected, while a report showed that investor confidence fell to its lowest level in three months.

French industrial production rose 0.3% last February, which was slightly higher than the projected 0.2%. Unfortunately, the Sentix investor confidence index printed at -14.7, which was way worse than expected -7.7 figure. This was also a reversal from the recent trend that indicated that consumer confidence was slowing improving.

We don’t have any data lined up for today, but keep an eye out for those bond auctions. If we start to see yields on the rise again, we could be in for another sell-off!