Daily Economic Commentary: Euro zone

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!

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.

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.

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!

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!

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!

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.

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!

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.

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!

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!

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.

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!

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[SUP]nd[/SUP] 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[SUP]th[/SUP] 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!

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!

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!

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!

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!

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!

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%.