Daily Economic Commentary: Euro zone - Page 85
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  1. #841
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    Default October 11, 2012

    The euro was able to stave off the dollar’s advances yesterday thanks to some positive comments by German Chancellor Angela Merkel and French President Francois Hollande. Their upbeat comments helped EUR/USD climb 31 pips to finish at 1.2901.

    According to Merkel and Holande, Greece is on track to receive it's next round of bailout funds, as it seems everyone is on the same page and trying to free up cash for the nation. Word on the street is that the decision to give Greece more moolah will be made at next week’s EU summit.

    In other news, both French and Italian industrial production figures beat market forecasts, printing monthly growth rates of 1.5% and 1.7%, after they were projected to print declines of -0.2% and -0.5%, respectively. Yes, I know, these are considered second tier reports, but if I was a euro bull, I’d take what I can get!

    It wasn’t all good times though, as ratings agency Standard & Poor’s surprised the markets at the end of the New York session when it downgraded Spanish debt from BBB+ to BBB-. This means that Spanish paper is now one level away from being reclassified from investment grade to junk status! Yikes!

    If Spanish debt does hit junk status, it could cause all sorts of problem for the country. For one, if it does get rated below BBB-, it would force many hedge funds and investment houses to dump their Spanish holdings as mandated by their policies. This in turn would cause yields to rise even higher which would most likely lead to Spain requesting a bailout.

    For today, we’ve got no hard data on tap, but as we’ve learned the past couple of days, you ALWAYS gotta stay on your toes when trading in the forex market! You never know what might happen!
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  2. #842
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    Default October 12, 2012

    Despite S&P’s credit rating downgrade of Spain, the euro was still able to post some spectacular gains yesterday. After it had sold-off heavily during the Asian trading session, the shared currency staged a strong rally to close the day 28 pips higher at 1.2928.

    Apparently, the euro was able to recover due to a very successful Italian bond auction. The lower credit rating also gave rise to speculation that Spain would be forced to avail of a bailout soon.

    The economic front was pretty much dead yesterday as only a few tier 3 reports were released. There was the final version of Germany’s CPI and the French CPI. Both didn’t have a meaningful impact on price action.

    The economic calendar will be uneventful again today as only the Industrial Production report is scheduled to publish. It’s expected to show a 0.4% decrease, opposite the 0.5% gain seen the previous month. Still, with the week coming to a close, we could see a bit of volatility from the euro as traders close shop before they go off for the weekend.
    Last edited by PipDiddy; 10-14-2012 at 09:22 PM.
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  3. #843
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    Default October 15, 2012

    The euro ended the week on a winning note, as it posted a 28-pip victory versus the dollar to finish at 1.2956, marking the third consecutive day it closed higher. Will the good times roll or will the euro bulls come in with a weekend hangover to start the week?

    The shared currency got a slight boost from industrial production figures, which printed a month-on-month growth rate of 0.6% for August. Not only was this the complete opposite of the anticipated 0.4% decline, but it also matched July’s rate of 0.6%. Tres bien, monsieur euro!

    Moreover, the bulls were able to overcome some disappointing data from the IMF, which downgraded their global growth forecasts for 2012 from 3.5% to 3.3%, and 3.9% to 3.6% for 2013. IMF economists pointed to growing concerns in Asia as the main reasons for the downgrade.

    The action begins in the euro zone tomorrow, when the German ZEW economic sentiment and CPI reports are due at 9:00 am GMT. If the ZEW report comes in worse than the projected reading of -14.6 or if the CPI reports indicate that inflation remains subdued, it may give the ECB President Mario Draghi and the rest of the ECB policymakers enough reason to reconsider their “no more rate cut for 2012” stance.
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  4. #844
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    Default October 16, 2012

    Not the best way to start the week, but eh, a win is a win, right? The euro scored a measly 8-pip win against the dollar yesterday when EUR/USD finished the New York session at 1.2954.

    It fared better against the yen though. EUR/JPY closed the day 34 pips above its opening price at 101.92.

    Positive data from the U.S. and China were released in the past couple of days. However, word around the street is, the euro wasn't able to benefit much from the pick up in risk appetite because Spanish bond yields once again rose!

    Borrowing costs on 10-year Spanish bond yields increased by 19 basis points to 5.77% yesterday. Although yields are far from the 7% threshold (considered to be the unsustainable level) the rise reflects investor concerns about a Spanish bailout.

    But don't worry, the euro doesn't have to be at the mercy of market sentiment! According to our forex calendar, we have a few reports on tap from the euro zone today. Make sure you watch out for them as they would probably affect the shared currency's price action.

    The German ZEW Economic Sentiment report for October is anticipated to show an improvement with the forecast up at -14.6 from September's -18.2 reading. Meanwhile,the EZ ZEW Economic Sentiment index is eyed at -1.1.

    Inflation reports are also due today! The headline CPI reading is seen at 2.7% for September while the core figure has been estimated at 1.6%. Positive figures would probably send the euro higher. Remember that ECB President Draghi mentioned that inflation pressures have somehow increased in the region. And so, higher-than-expected readings could give the ECB one more reason not to slash rates.

    All economic data are due at 9:00 am GMT. Don't miss them!
    Last edited by PipDiddy; 10-15-2012 at 10:27 PM.
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  5. #845
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    Default October 17, 2012

    SCOOOOOORE!!! Despite mixed economic data, the euro triple roundhouse kicked its counterparts yesterday. EUR/USD blasted above the 1.3000 major psychological handle, while EUR/JPY rocketed by 106 pips. So what fired up the euro bulls?

    If you guessed Spanish bailout talks, then you better give yourself a pat on the back! Aside from conducting a better-than-expected bond auctions yesterday, my hombres in Spain spread good vibes in the markets when word got around that the government is setting up credit lines to satisfy potential bailout conditions. Of course, it also helped that two German supported Spain, saying that they’re open to setting up a precautionary credit line using the region’s rescue fund.

    As for economic reports, we saw the region’s CPI clock in at 2.6% in September, only slightly lower than the 2.7% growth that markets were expecting. The core CPI came in at 1.5% as expected.

    Germany’s ZEW economic sentiment report also supported the euro when it printed at -11.5, a bit better than the previous month’s -18.2 reading while the ZEW report for the euro zone inched up to -1.4 from last month’s -3.8 reading.

    Lastly, Italy’s trade balance data showed a -0.60 billion EUR deficit after printing a 4.8 billion surplus last month while the euro zone showed a 9.9 billion EUR trade surplus, higher than last month’s 7.2 billion EUR figure.

    No reports are expected from the region today, so keep your eyes peeled for more bailout talks from Spain and even Greece!
    Last edited by PipDiddy; 10-16-2012 at 09:31 PM.
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  6. #846
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    Default October 18, 2012

    Awww yeah! Six for six, baby! The euro extended its gains against the dollar in yesterday's trading. EUR/USD rallied almost immediately after the day started at 1.3051 and finished 71 pips higher at 1.3122.

    Meanwhile, EUR/JPY was up with a 65-pip win at 103.63 by the end of the New York session.

    What had the euro flaunting its swag on the charts yesterday? Well, for the most part, euro bulls had credit ratings agency Moody's to thank for their run.

    It issued a statement reassuring Spain of its Baa3 rating. Remember that there had already been speculations that the agency might downgrade the country's credit rating to junk status. And so, Moody's decision to keep its grade on Spain steady had a lot of market participants giddy.

    I wonder if the positive vibes brought about by the credit ratings agency's decision would carry on in today's trading. Our forex calendar doesn't have any economic report on tap from the euro zone, however, the EU Leaders' Summit and a Spanish bond auction are scheduled today.

    Keep an ear out for what EU policymakers have to say about Spain and Greece. If they hint that they're more willing to help out the two debt-ridden nations, we might just see the euro extend its gains. As for the Spanish bond auction, keep tabs on the demand as well as the borrowing costs that the country would have to pay.

    Good luck!
    Last edited by PipDiddy; 10-17-2012 at 10:18 PM.
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  7. #847
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    Default October 19, 2012

    And the euro comes tumbling down! For the first time in a week, the euro took some heavy losses, as it stumbled versus the dollar and the yen. EUR/USD fell 49 pips to finish at 1.3073, while EUR/JPY closed 2 pips below its opening price to end at 103.61 to form a near-perfect doji on the daily chart. What gives?

    What’s funny about yesterday’s price action is that Spanish bond yields actually dropped to their lowest levels in SIX months. Wait a minute… traders still want Spanish bonds? Shouldn’t this be euro positive???

    Apparently, despite the drop in yields, we saw a classic case of risk aversion take over the markets, as U.S. equities dropped on poor Google earnings figures. This triggered a sell-off in riskier assets like the euro, which had actually been on quite a roll this week.

    For today, we’ve got second tier data in the form of the German PPI, which is scheduled for release at 6:00 am GMT. Expectations are that producers paid 0.3% more for their raw materials last month, which would mark a slower price increase than the 0.5% we saw the month before. In any case, I don’t really expect this to affect the markets too much.

    Instead, pay attention to the EU economic summit. If we hear any comments about Spain being more willing to request a bailout, it may spark another risk rally in the markets.
    "The only cable I watch is the pound baby."

  8. #848
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    Default October 22, 2012

    Uh oh, things aren't looking too good for the euro these days as it continued to slide down against the Greenback and the Japanese yen last Friday. EUR/USD ended the day at 1.3021, more than 50 pips down from its 1.3073 open price, while EUR/JPY closed at 103.27.

    There weren't any economic reports released from the euro zone last Friday but jitters about the EU Summit and upcoming Spanish elections triggered a euro selloff. As it turns out, market watchers weren't expecting any positive developments from the EU officials' meeting over the weekend and they were right!

    As expected, Spain was still stubborn about asking for a bailout while EU leaders couldn't seem to reach an agreement regarding the proposed euro zone banking union. This means that we'd have to wait for the next EU Summit, which is set to take place in December, before the euro zone fiscal union would be implemented.

    There are no major reports due from the euro zone for the next couple of days as the first set of top-tier releases will take place on Wednesday. Germany and France are set to print their services and manufacturing PMI figures starting 8:00 am GMT that day so make sure you're prepared for additional volatility and another potential selloff in case the actual figures miss expectations.

    Other than the PMI data, there are no other top-tier releases scheduled for the rest of the week. With that, don't forget to keep close tabs on updates regarding the euro zone debt situation. Be careful out there!
    "The only cable I watch is the pound baby."

  9. #849
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    Default October 23, 2012

    Up, up, and away! The euro was able to show some strength yesterday, thanks to a bit of risk appetite. EUR/USD, which had started the day at 1.3021, rallied slowly during the day to end the U.S. trading session at 1.3057.

    The economic calendar was empty yesterday and today, only the Belgium NBB Business Climate survey will be published. It will come out at 1:00 pm GMT and it is projected to print a reading of -10.8. In the last reporting period, it showed a -11.6 reading.

    The Belgium NBB Business Climate survey measures how healthy manufacturers, builders, services and trade-related firms are. A reading below 0.0 indicates that conditions are getting worse. In this case, survey respondents mostly believe that the industry is still in contraction mode, but it has improved a little.

    Other than the survey, keep an eye out for market sentiment. It has been the main driver of price action recently and good news from Spain (like the country officially asking for aid) could catapult the euro to new highs.
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  10. #850
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    Default October 24, 2012

    Timberrr! Thanks to weak economic reports and a surprise from Moody’s, the euro fell like a log against its counterparts yesterday. EUR/USD slipped by 76 pips while EUR/JPY also fell by 75 pips. What the heck happened?

    Well, it certainly didn’t help that the euro region printed weak reports. French business confidence and production outlook took a hit in November while the region’s consumer confidence clocked in at -26, which is still around its three-year lows.

    Moody’s also joined the bear party when it surprisingly downgraded the credit ratings of five Spanish regions including Catalonia. Since a downgrade could mean higher cost of debt for these regions, Moody’s move was taken as another step towards a Spanish bailout.

    Last but not the least is the underperformance of the equities markets. Anticipation of weak corporate earnings and risk aversion weighed on the high-yielding currencies, enough to drag them to the red zone by the end of the day.

    At 7:00 am to 8:00 am GMT today we’ll see a parade of German and French manufacturing and services PMI. If the reports print lower than their previous readings, then it will be up to Super Mario, who is due to give a speech at 11:45 am GMT, to save the day for the euro. Will he deliver? Stay at the edge of your seats on this one, folks!
    Last edited by PipDiddy; 10-23-2012 at 10:38 PM.
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