Daily Economic Commentary: Euro zone

[PipDiddy]

Still no love for the euro! With yesterday's disappointing economic reports giving traders plenty of reason to dump the euro, the shared currency found itself on the sell side of the equation once again. It lost 19 pips to the dollar, 16 pips to the yen, and 52 pips to the pound.

It doesn't take a genius to see that the euro zone's economic woes are far from over. Yesterday's PMI reports are proof enough! Save for the French flash services PMI, all of the reports we saw yesterday came in worse than expected.

The region's manufacturing sector continued to contract as the index recorded a reading of 45.3 (versus 46.6 forecasts). The euro zone's services sector PMI clocked in at 46.2, which is just under the 46.5 reading that many had anticipated.

Meanwhile, the German IFO business climate index slipped from 101.4 to 100.0, instead of rising to 101.5 as the median forecast had predicted.

What these numbers tell us is that euro zone businesses just went through their most devastating month since the recession three years ago. It also suggests that austerity measures may have already begun to take its toll on growth and that the euro zone's economic slowdown may be getting worse. Cue the horror music!

In other news, Mario Draghi's speech added to the gloomy mood as he said he expects the euro zone economy to underperform in the near future. He was disappointed that some of the region's bigger countries didn't implement rate cuts, and he claims that deflation presents a bigger risk than inflation at the moment.

We certainly have a lot to think about after yesterday's heavy reports and events. Luckily, we'll have plenty of time to mull over these things as the euro zone won't be publishing any tier 1 reports today. In the meantime, if you plan on trading the euro, I suggest y'all keep risk sentiment in check. Peace and good luck, homies!

[PipDiddy]

Thanks to some surprise downgrades by Standard & Poors, the euro once again stumbled in yesterday’s trading action. After hitting a high at 1.3024, EUR/USD dropped sharply, falling all the way down to 1.2945, marking a 16 pip loss for the day.

S&P downgraded three large French banks yesterday, citing concerns about the potential for the country to hit another recession. The three large banks that got smacked with a downgrade were BNP Paribas, Credit Agricole, and Societe Generale.

Concerns about Greece and how much additional funding it needs also weighed down the euro. Word in the forex grapevine is that the Troika believes Greece needs between 16 to 20 billion EUR, which is way higher than Greek Finance Minister Stournaras’ estimate of 13 to 15 billion EUR. In addition, it isn’t clear whether or not the Troika will grant Greece the extension it needs to pay out its existing payments.

For today, we’ve only got second tier data due in the form of the GFK German consumer climate report, which is scheduled for release at 6:00 am GMT. Early predictions are calling for the index to print at 5.9, which is pretty much in line with the scores we’ve been seeing the past few months. If the report prints exceptionally better than expected, it could give the euro a small boost at the beginning of the London session.

[PipDiddy]

If I were to pick one letter in the alphabet to describe EUR/USD’s price action yesterday, it would be the letter “V.” EUR/USD started the day at 1.2945, fell to a fresh 11-day low at 1.2883, and then rallied back up near its open at 1.2936.

On the economic front, the Gfk Consumer Climate survey and the Spanish unemployment report were released. The Gfk Consumer Climate survey came in slightly better than expected as it printed a 6.3 reading versus the 5.9 forecast. The previous month’s 5.9 figure was also revised higher to 6.1.

Meanwhile, the Spanish unemployment report showed that job market has gotten slightly worse. Now, the percentage of unemployed people is at 25.0%, up from the previous month’s 24.6%.

Up ahead, we’ve got a couple of medium-tier economic releases that could have a significant effect on the euro. For instance, we will see the German Preliminary CPI figures today. It’s predicted to show that the inflation rate in Germany remained flat in October.

Then tomorrow, at 8:00 am GMT, the Spanish GDP for the 3Q 2012 and the German Unemployment Change will both be released. ECB President Mario Draghi will also be making a speech at the same time. On Wednesday, the reports to keep an eye out for are the German Retail Sales report and euro zone’s CPI and unemployment report.

As you can see, there’s a lot on the economic plate this week. This means that you should be extra careful in your trades as sentiment could shift any time. Good luck, homies!

[PipDiddy]

Make that five in a row! Once again, the euro stumbled across the charts like a drunk frat boy, as debt-related concerns weighed down the shared currency. EUR/USD fell 48 pips to finish at 1.2902, its lowest closing price in two weeks.

Once again, bailout concerns dominated euro flows, as Spain remain reluctant to file for a bailout. Spain has been adamant about NOT tapping into any bailout funds, although there are rumors that our amigos may just be stalling for time until all the election buzz is over.

Meanwhile, Greece is doing its best to avoid having to adhere to any additional austerity measures as it awaits the next round of bailout funds. If the Troika feels it is necessary for Greece to implement stricter cost cutting measures, it could trigger more uncertainty in the markets as we’d most likely see a negative reaction from Greece.

In other news, the German preliminary CPI report indicated that inflation remained flat this past October.

For today, we’ve got a couple of second tier data headed our way.

First, there’s the Spanish GDP report due at 8:00 am GMT. Expectations are that the Spanish economy shrank by 0.4% last quarter, which would equal the same drop we saw during the 2^nd quarter.

Later on at 8:55 am GMT, the German unemployment change report is projected to show that 10,000 lost their jobs month. This would mark the 5^th straight month of a decline in the job market, although it’s still nowhere near the losses we saw back in 2008.

If these reports come in worse than expected, it could give the bears enough ammo to drag down the euro for the sixth consecutive day!

[PipDiddy]

Now that’s how you bust out of a losing streak! After 5 straight days of losses, the euro finally edged higher yesterday, as EUR/USD closed 1.2960, 58 pips above its opening price.

The euro benefited from a combination of factors, which were mainly good economic data and overall dollar weakness.

Spanish GDP figures came in slightly better than anticipated, as the Spanish economy shrank by just 0.3%, as opposed to the expected 0.4% contraction. Yes, it is still a contraction, but we’ll take any good news that we can get!

The Italian bond auctions were also somewhat successful, as the Italians were able to sell 7 billion EUR worth of bonds at slightly lower yields.

It wasn’t all good news though, as we saw poor labor data from Germany. We saw job cuts of 20,000 last month, which was twice the anticipated 10,000 figure. This was just another set of data that shows weakness in the Germany economy.

For today, we’ve got a slew of second tier data headed our way, so it’s time to put on those trading gloves and get to work!

First, German retail sales figures are due at 7:00 am GMT, with expectations being that we’ll see a slight 0.4% increase.

Later on at 10:00 am GMT, the euro zone CPI and unemployment rate reports are scheduled to hit the markets. Inflation is expected to remain subdued at 2.5% while the unemployment rate is projected to remain steady at 11.4%.

While these reports aren’t normally high impact reports, if any of the releases come in drastically different from expectations, it could trigger some wild moves on euro pairs. That said, good luck trading today, homies!

[PipDiddy]

Aaack! The euro was so close to ending the day above the major 1.3000 handle against the dollar yesterday when all of a sudden, it lost its footing. By the New York session close, EUR/USD was back down to 1.2962, just 2 measly pips above its opening price.

It would seem that traders got giddy about the U.S. markets opening again after Hurricane Sandy forced a two-day shutdown. Of course, it also helped that the German retail sales report topped expectations for September. After disappointing forecasts for the past 4 releases, consumer spending in the euro zone's largest economy came in more than thrice the consensus of 0.4% when it printed at 1.5%.

Unfortunately, other data from the euro zone soon reminded investors that the region is far from solving its problems. Labor statistics showed that the unemployment rate jumped to 11.6% in September from being at 11.5% in August (upwardly revised from 11.4%).

I wonder how the euro would trade today given that banks are closed for All Saints day. If you're looking to trade the currency, it would do you well to keep tabs on the reports that we have from the U.S. Looking at our forex calendar, it seems like we have a few top-tier ones that we can sink our teeth into!

[PipDiddy]

Euro sellers were anything but saints on All Saints day as they showed no mercy on the charts yesterday. Despite the lack of economic reports, traders dumped the euro, taking EUR/USD 21 pips down from its opening price to end at 1.2941.

Later on, the euro zone will break its silence with a few PMI reports.

At 8:15 am GMT, it'll roll out the Spanish manufacturing PMI, which last printed a reading of 44.5. Then at 8:45 pm GMT, it'll follow up with the Italian manufacturing PMI, which many expect to tick up from 45.7 to 45.9. And finally, it'll wrap things up with the region-wide version of the report at 9:00 am GMT. Survey says we'll probably see a repeat of the 45.3 reading that we saw in September.

Also, keep in mind that the U.S. is set to publish its NFP report later in the New York session as that could greatly affect EUR/USD price action today.

Good luck trading today, fellas! Only a few hours left before the weekend... make 'em count!

[PipDiddy]

The market pulled the rug out from under the euro last Friday as the shared currency came crashing down right before the weekend. EUR/USD recorded its biggest loss since July, diving down 109 pips to greet the weekend at 1.2831.

It was really a combination of things that led to the euro's demise. Another month of better-than-expected U.S. job gains coupled with gloomy euro zone manufacturing data kept sellers in control of EUR/USD.

According to the latest stats, manufacturing activity dipped for the 15th straight month in October as both output and new orders declined. Considering that the region's recovery from the last recession was powered largely by manufacturing industry, this bit of news is obviously very alarming.

Will the euro zone publish more upbeat results today? Let's find out at 8:00 am GMT, when the Spanish unemployment report is due for release! Survey says that Spain likely lost another 90,300 jobs last month, which is a terrible followup to the decline of 79,600 in September. If October can't meet these lowly expectations, I wouldn't be surprised to see the euro sell off once again!

After that, the euro zone will publish the Sentix investor confidence report. Due at 9:30 am GMT, the index is slated to rise slightly from -22.2 to -20.7.

If you're seeking a major event to trade later in the week, you'll find what you're looking for in the ECB rate decision on Thursday. With the euro zone publishing disappointing economic results as of late, the question on many investors' minds is, "What does the central bank plan to do now?" Well, we'll all find out soon enough!

[PipDiddy]

Slumping! That’s the only way to describe the euro nowadays, baby! For the 10th time in the past 13 trading days, EUR/USD closed lower, as traders unloaded their positions in riskier assets. EUR/USD closed at 1.2789 for a 29 pip loss, marking the first time in over a month that the pair finished below 1.2800.

Poor economic data, as well as rising Spanish and Portuguese yields weighed on the euro and caused it to sink. Recent data showed that Spain lost another 128,200 jobs last month, continuing a disturbing trend where we’ve seen job losses grow over the past three months.

Meanwhile, the Sentix Investor Confidence index also printed at 18.8. While this was a slight improvement from the previous month's reading of -22.2, it also marked the 16th straight month that the index has printed below 0.0, indicating continuined pessimism about the region.

For today, we've got another round of second tier data headed our way in the form of the Spanish and Italian service PMIs starting at 8:15 am GMT. If today's PMI reports print higher than last month's respective scores of 40.2 and 44.5, it could provide the euro some ample support to pare some of its recent losses.

Then later on at 11:00 am GMT, German factory orders growth figures will be available. Expectations are that orders dropped slightly over the past month by -0.3%.

In any case, I'd keep an eye out for what happens during the New York session, because the Obama-Romney battle is heating up! There's no telling how this can affect the financial markets, so watch out!

[PipDiddy]

For the first time in 4 days, EUR/USD was able to post a winner. The pair, which started the day at 1.2790, closed the day 27 pips higher at 1.2817. Sure, the gains weren’t as big as the losses the pair incurred last week, but a win is a win.

Generally speaking, the markets were steady. Traders seemed to be in wait-and-see mode as they sat on the sidelines ahead of the results of the U.S. elections.

Economic data releases were pretty tame, too. The Spanish Services PMI came in slightly better than the previous reading at 41.2. The Italian Services PMI also showed improvement as it climbed to 46.0 from 44.5.

The only “bad” news from euro zone yesterday was the disappointing German Factory Orders report. It came in at -3.3%, much lower than the -0.3% forecast and the previous month’s -0.8% (revised up from -1.3%)

Today, we’ve got two important reports due. The first one, euro zone’s retail sales report, will publish at 10:00 am GMT. It’s projected show a flat reading after the month prior’s 0.1% gain. The second one is Germany’s Industrial Production report. The consensus for that one is -0.4%.