Daily Economic Commentary: Euro zone

[PipDiddy]

Another day in the red? What's new?! The euro lost ground against the Greenback and the Japanese yen as EUR/USD ended the day at 1.2286 while EUR/JPY closed at 96.90. Will the euro have a chance to bounce back today?

Even though the euro zone didn't release any economic data yesterday, the euro was sold off heavily thanks to news reports showing that Greece might need an extension of their ongoing austerity program The report revealed that the debt-ridden nation might miss its deficit targets AGAIN and that they'd need more time to come up with the 11.5 billion EUR in spending cuts. Better keep your eyes and ears peeled for any updates since the Greek Prime Minister is scheduled to meet with Merkel, Hollande, and Juncker to discuss their options next week.

Another factor that probably triggered the euro's selloff yesterday was the rumor that the SNB was already starting to diversify out of their euro holdings. After all, holding on to their EUR/CHF has proven to be expensive for the central bank and they might be thinking of accumulating reserves in other currencies instead. Although these are nothing more than rumors for now, stay on your toes in case the SNB confirms these plans!

The euro zone is set to release its CPI figures for July at 9:00 am GMT today. The headline figure is expected to show a 2.4% annualized increase while the core figure could post a 1.7% yearly rise. Don't forget that the U.S. is also set to print a few high-profile reports, namely its building permits, housing starts, and Philly Fed index.

Take note that the U.S. dollar has been reacting to fundamentals lately, which means that weaker than expected U.S. data could trigger a dollar selloff and be positive for the euro... Unless the euro zone comes up with another set of bad news, that is!

[PipDiddy]

Finally, a bit of activity! In its biggest move this week, the euro gained 69 pips against the dollar as EUR/USD rallied from its opening price of 1.2286 to end the day at 1.2355. Let’s see if it can end the week on a strong note!

No surprises from yesterday’s CPI releases… As a matter of fact, economists were right on the money with their forecasts as headline CPI held steady at 2.4% while core CPI ticked up from 1.6% to 1.7%.

Will today’s reports match forecasts too? At 6:00 am GMT, the German PPI will be released. Look for it to reverse the 0.4% decline in June with a 0.4% uptick in July. Then at 8:00 am GMT, current account data will be available. According to economic gurus, we can expect the euro zone’s surplus to narrow from 10.9 billion EUR to 7.8 billion EUR.

To round up the euro zone releases at 9:00 am GMT, we’ll be treated to the June trade balance report, which is slated to show a slimmer surplus of 5.4 billion EUR, down from 6.3 billion EUR.

Now, these reports may not have much of an impact on the markets individually, but if they all print similar results (for example, all better than expected), it may lead to a strong move on euro pairs.

[PipDiddy]

Fall back, fall back! Euro bulls retreated from resistance around the week's highs on Friday. EUR/USD tapped an intraday high of 1.2383 before plunging to 1.2289. By the end of the New York session, the pair had settled at 1.2334, 21 pips below its opening price.

Market junkies say that the lack of developments regarding the European debt crisis as well as the better-than-expected U.S. data might have sparked a wave of dollar-buying, causing the euro its demise. Heck, not even positive current account and trade balance reports from the euro zone were enough to keep the shared currency afloat.

The euro zone reported its biggest account surplus on record last Friday at 10.9 billion EUR for June and topped the consensus for a 7.8 billion EUR reading. Meanwhile, the trade balance report for the same month came in almost twice the forecast (5.4 billion EUR) at 10.5 billion EUR.

Our forex calendar is blank for reports from the region today. With that said, don't be surprised to see limited action on EUR pairs. If you're looking to trade the currency, it would be a good idea to keep an ear out for updates regarding the debt crisis from the euro zone and gauge market sentiment.

[PipDiddy]

The euro just can't catch a break, can it? Even though the markets were unusually inactive, the euro still couldn't muster the strength to end the day in the green. It slipped 12 pips against the dollar while retreating 19 pips against the yen. Bummer, dude!

What made headlines up in Europe were reports that the ECB may be considering the use of yield caps on certain government bonds in the euro zone. Basically, with the use of yield caps, the central bank will be telling the markets that it won't allow bond yields to rise past a certain point. I guess you can say it works similarly to the EUR/CHF cap that the SNB implemented!

If the ECB can somehow push through with yield caps, it could finally put a halt to the region's rising borrowing costs. But remember, these are just rumors for now! Y'all shouldn't celebrate until things are official, fellas!

No reports on the economic calendar today, but stay on your toes for further surprise developments and rumors in the euro zone.

[PipDiddy]

Thanks to renewed rumors of action by the ECB, the euro lit up the markets Vito Corleone-style! EUR/USD rose 115 pips to finish at 1.2464, while EUR/JPY closed at 98.76, up a solid 71 pips on the day.

Rumors circulated the markets that German officials would not oppose of the ECB’s proposal to implement a bond purchase program that would effectively cap yields from rising further. This means that yields on Spanish or Italian bonds would be capped and in effect, make it cheaper for those countries to issue debt.

Naturally, this eased concerns about the state of the European debt crisis, allowing the euro to soar up the charts.

No biggies on the docket again today, but if we’ve learned anything from yesterday, it’s that you ALWAYS have to pay attention. You never know what news might hit the airwaves!

[PipDiddy]

EUR/USD had traded sideways for the majority of Asian and European trading session but suddenly burst into life when the FOMC meeting minutes came out. EUR/USD, which had started the day 1.2564, ended the U.S. trading session 58 pips higher at 1.2522.

The FOMC meeting minutes showed that many voting members believed that additional easing would be likely needed soon unless there is a significant improvement in the economy. It was a sharp contrast to June’s minutes where only a few members saw the need for further easing.

No news reports were released from the euro zone yesterday but we’ve got a couple of important PMIs scheduled to be published. They will begin coming in at 7:00 am GMT. The first PMI reading will be from France, then from Germany, then from the entire euro zone. If the PMIs beat forecast, EUR/USD will probably continue its rally.

[PipDiddy]

Way to go, euro! For the third trading day in a row, the euro bulls beat the bears as they pushed EUR/USD higher in the charts. Should they thank the euro zone’s economic reports, or the QE3 speculations in markets?

Judging by the euro’s price action, it seems that the euro bulls owe their luck to both. The German, French, and the euro zone’s manufacturing and services PMIs mostly came out better-than-expected, which helped fuel the euro rally. Of course, it didn’t hurt that the U.S. printed disappointing figures that increased speculations that the Fed would pull the trigger on the QE3 program!

Only Belgium’s NBB business climate report at 1:00 pm GMT is slated to come out of the region today, so you might want to watch the newswires for any speeches made by the euro zone officials. Who knows? Maybe we’ll get more word about a possible Spanish bailout, or Merkel’s support for the euro. Just remember to stick to your trading plan, aight?

[PipDiddy]

Oh snap, did the euro just break its winning streak against the Greenback? While the common currency barely moved against the pound and the yen, EUR/USD finished the day 50 pips lower than its open price. What gives?

No major reports were released from the euro region aside from Belgium’s business climate data, so the euro’s price action was vulnerable to noise in the markets.

EUR/USD fell in the early trading sessions when the market bees buzzed about how Germany is preparing for a temporary Grexit. The euro was only able to recoup some of its losses in the later trading sessions when Big Ben Bernanke defended the use of QE to prop up Uncle Sam to a House Member. Talk about news trading!

Only Germany’s import prices at 6:00 am GMT and the German IfO business climate at 8:00 am GMT are up on the docket today, so make sure you pay attention to any speeches by the euro zone officials!

Good luck trading this week, homies!

[PipDiddy]

Not today, boys! For the second trading day in a row the euro bears outmuscled the bulls as a disappointing German report got mixed in with risk aversion in markets. EUR/USD settled with a 15-pip drop after hitting an intraday high at 1.2537.

With Germany’s IfO business climate clocking in at falling to its lowest level since March 2010, who could blame the euro bears for shorting? The data came in at a 102.7 when analysts had priced in a 102.3 reading.

Of course, it also didn’t help that market players are starting to lose excitement over the ECB’s supposed bond-buying program. Word on the hood is that nothing will be finalized until the German High Court publishes its decision on the ESM around mid-September.

Last but not the least, the euro took a hit from traders who are starting to believe that the Fed won’t be signalling a QE3 program in the Jackson Hole meeting after all. Uh-oh.

Only the GfK consumer climate at 6:00 am GMT and the money supply and private loans data at 8:00 am GMT are scheduled for release today, so you might want to stay glued to the tube in case we hear more details from the euro zone or even the Fed officials regarding their stimulus plans.

Good luck trading today, homies!

[PipDiddy]

Redemption was the name of the game for the euro yesterday (not in the same way that Metta World Peace changed his name to Military Industrial Complex). EUR/USD skyrocketed higher to end the day 69 pips above its opening price at 1.2568. Meanwhile, after EUR/JPY bottomed at 97.89, it rallied higher to close the day at 98.69.

Spanish and Italian bond auctions went smoothly yesterday and might have helped the euro. However, some market junkies say that euro bulls had ECB President Mario Draghi to thank for their run. The central bank made an official announcement yesterday that the ECB head honcho, along with the rest of the ECB executive board, won't be able to make it to the Jackson Hole Symposium this weekend due to a heavy work load.

Consequently, the news got everyone excited! Investors now have their hopes up that the ECB would announce big plans when it makes its monetary policy announcement next Thursday. Now, all we gotta do is wait and see if the bank could deliver.

Until then, we should be on our toes for economic reports. Our forex calendar only has the German preliminary CPI (scheduled at 12:00 pm GMT) on tap for the euro and it is eyed to come in at 0.1%. But on the other side of the Atlantic, the U.S. will be releasing its preliminary GDP report which will probably affect price action later in the New York session.