Daily Economic Commentary: Euro zone

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%.

And the selling resumes! Thanks to some bearish forecasts by the European Commission, the euro went into a major free fall. EUR/USD dropped 110 pips from its high at 1.2877 to finish at 1.2767, while EUR/JPY closed 106 pips lower to end the day at 102.00.

According to our buddies over at the European Commission, they expect the euro zone to contract by 0.4% in 2012, and to grow by just 0.1% in 2013. This was way down from the initial 1.0% growth forecast for next year. Furthermore, the EC is predicting that 11 euro zone members, including both Spain and Italy, to miss their deficit targets! Yikes!

Other economic data didn’t help the euro’s cause either, as euro zone retail sales fell by 0.2%, while German industrial production clocked in at -1.8%. These numbers were way off the predicted 0.0% and -0.4% figures, respectively.

Can the euro bulls bounce back today or will the sell-off continue?

Well, they got some good news earlier, as the Greek Parliament decided to pass additional austerity measures worth 18.5 billion EUR that would help the country receive 31.5 billion worth of financial aid. Some of the measures include pension cuts of 5-10%, salary cuts on government positions, and raising the retirement age from 65 to 67.

The major market mover lined up for today though, will be the ECB interest rate statement, due at 12:45 pm GMT. The central bank isn’t expected to cut rates, but do watch out for the accompanying statement at 1:30 pm GMT. Who knows what Super Mario Draghi will say this time! Make sure y’all hit up Forex Gump’s ECB preview for more insight on this potential game changer.

Ka-pow! Bears delivered a multi-punch combo to the euro in yesterday’s trading. EUR/USD finished the day lower at 1.2746 after opening at 1.2770. Meanwhile, EUR/JPY ended the day with an 82-pip loss at 101.30.

There were a few factors that made the euro vulnerable to the sellers’ advances.

For one, markets are worried about China. Not only do we have a lineup of economic reports from the Asian country, but the government is also Going through major political reform. The Communist Party is still the ruling party in China, however, markets are on their toes for policies on growth and the Yuan that will be introduced by the new leaders.

Greece also added to the euro’s problems. Riots have broken put in the debt-stricken country after the government agreed to implement more austerity measures and gave investors more reason to stay out of the euro.

Of course, there was also the ECB rate decision. ECB President Mario Draghi didn’t announce any rate hike. In fact, he sounded pretty comfortable with the bank’s current monetary policy, saying that inflation would fall below the ECB’s target of 2%. However, he was very pessimistic about the region’s growth in the coming year.

The German trade balance report didn’t bode well for the euro either, as it only affirmed Draghi’s concerns about growth. September’s trade surplus for September was lower at 17.0 billion EUR than August’s reading of 18.1 billion EUR and missed the 17.2 billion EUR forecast.

With all the pessimism surrounding Europe’s growth, I wouldn’t be surprised to see the euro trade lower should the French industrial production report come in lower than the -0.9% forecast later at 8:45 am. So make sure you don’t miss it, ayt?

The euro’s price action was as mixed as the Avengers’ personalities last Friday as traders priced in euro zone reports and events ahead of the weekend. The common currency fell against the dollar and the yen, but gained against the pound and the franc. What’s up with that?

Remember that market geeks were already worrying about German growth, which they say could significantly weigh on the whole region’s economy, and consequently lead to an overall weakness in global economic growth.

Well, it didn’t help that France and Italy had printed weak reports. France’s industrial production came in at -2.7% in September against analysts’ expectations of a 0.9% downtick. Italy didn’t do better with its own industrial data showing a 1.5% decrease, a disappointment from August’s 1.7% growth.

And then there are rumors of a Greek default and a Spanish bailout. In the ECB’s interest rate decision last week, Mario Draghi hinted that the balls are in the Greek and Spanish officials’ courts, as the central bank is already doing its part to help the countries get over their debts.

It seems that the Greeks were listening last week! Aside from narrowly approving new austerity measures last week, the Greeks had approved its 2013 budget plans earlier today. Analysts believe that with the new budget plans, the Troika would find an easier time approving the next Greek bailout tranche to the tune of 31.5 billion EUR.

But while the euro zone officials decide on the future of Greece, we could also trade a couple of reports scheduled this week. Tomorrow at 11:00 am GMT we’ll get hold of the German ZEW economic sentiment data, while we’ll also see the big GDP reports from France, Italy, and the whole euro region on Thursday at around 10:00 to 11:00 am GMT.

Keep your eyes peeled for these reports, will ya?

The euro is off to a good start! After scoring three consecutive daily losses against the dollar and the yen, the shared currency was finally able to put an end to its losing streaks. Both EUR/USD and EUR/JPY finished the day 8 pips above their opening prices at 1.2713 and 101.02, respectively. Boo yeah!

Is the euro priming for a comeback?

Some analysts warn not to get too excited over the prospect of it. Naysayers think that the euro’s measly wins yesterday were nothing significant. In fact, they think that the shared currency should’ve been able to rally higher after the approval of the 2013 budget by Greek policymakers.

Then again, Germany’s remarks about its unwillingness to give the debt-ridden country more bailout funds until after the Troika releases its report next week might have weighed down on sentiment. Word around the hood is, Greece is at risk of a technical default if it fails to raise enough money by mid-November. Yikes!

EU finance ministers continue their meetings today. It would be a good idea to keep tabs on what they talk about as issues related to Greece would probably continue to affect the euro’s trading.

Aside from that, make sure that you also pay attention to the German ZEW Economic Sentiment report for November which is due later at 10:00 am GMT. Expectations are for the report to print at -9.9, indicating pessimism about euro zone’s largest economy. A better-than-expected figure could send the euro higher while a negative one could fuel a sell-off. Don’t miss it, ayt?

Weaker-than-expected economic data? Who cares! Thanks to the good news surrounding the euro zone crisis, EUR/USD was able to recover from its slump early on and close the day barely changed from its opening price. The pair began the day at 1.2713 and then closed the U.S. trading session at 1.2705.

ESM head Klaus Regling went on the wires yesterday and said that Spanish banks were on track for scheduled payments from its 100 billion EUR bailout and will not need to draw from the emergency funding. In addition, Greece was reported to have managed to raise enough sufficient funds to make the 5 billion EUR debt repayment due this week.

On the economic front, the German ZEW Economic Sentiment survey disappointingly dropped to -15.7 for the month of November. The forecast was for the reading to improve to -9.9 from the previous month’s -11.5. According to head of the ZEW, “prevailing recessionary developments” in the euro zone would most likely continue for the next couple of months.

No tier 1 reports are scheduled to publish today but that doesn’t mean we won’t see any economic data. At 10:00 am GMT, euro zone’s Industrial Production report will be released. It’s expected to show that production declined 1.6% September, opposite the 0.6% rise seen in August. Falling industrial production is normally seen as bearish for the domestic currency as it indicates that economic activity is also declining.

Way to go, little one! The euro managed to score double wins against the Greenback and the yen yesterday, despite the gloom and doom in the markets. EUR/USD closed roughly 40 pips up from its 1.2705 open price while EUR/JPY ended 18 pips above the 102.00 handle.

Industrial production in the euro zone reportedly slipped by 2.5% in September, way worse than the estimate of 1.6% decline. This was also much worse than the previous month’s figure, which was revised up from 0.6% to 0.9%. However, this negative report barely had any impact on euro pairs as German officials announced that they were hopeful Greece would receive its bailout funds soon. This, combined with EU leaders’ confirmation that Spain would be able to trim its deficit early next year, was enough to lift the euro’s spirits.

Today is a big day for the euro zone as it is set to release its GDP figures for Q3. Analysts are estimating a 0.2% economic contraction for the period, which would follow the region’s -0.2% GDP reading for the second quarter. If that’s the case, then the euro zone would officially be back in recession, folks! Keep an eye out for the actual figure due 11:00 am GMT.

The euro zone is also set to release its CPI figures along with the GDP report during today’s London session. Their annual CPI is expected to stay at 2.5% while their core CPI could remain at 1.5%. These figures aren’t expected to have a huge impact on the euro’s movement as traders will most likely focus on the GDP release. Be careful out there!

Rise, EUR/USD, rise! Thanks to extremely positive data, the pair was able to climb once again and close the U.S. trading session higher than its day open price. The pair ended the day at 1.2774, up from 1.2746.

Both the France and German GDP reports came in better than expected yesterday. The one for France showed that the economy grew 0.2% versus the flat reading the market had initially expected. Meanwhile, the German GDP report showed that the economy expanded 0.2%. The forecast was only for a 0.1% rise. For the entire euro zone, the GDP was -0.1%, slightly better than the -0.2% consensus.

The region’s CPI report was in line with expectations. The CPI was at 2.5% while the core version was at 1.5%.

Today, only the Current Account Balance will be published. It will publish at 9:00 am GMT and is projected to show a 9.2 billion EUR surplus for the month of September. In August, the surplus was at 8.8 billion EUR.

With the week coming to a close, you should be extra careful riding EUR/USD’s intraweek uptrend. Traders could begin taking profit, which could result in a mild pullback.

Ka-blam! When news of the euro zone being officially in a recession hit the newswires, the euro promptly got punished. It lost 46 pips against the dollar, 36 pips against the yen, and 43 pips against the pound. Yeouch!

Last Friday the euro printed a decent trade balance report with an 11.3 billion EUR surplus against its 8.9 billion EUR figure in August. Exports fell though, so investors weren’t too giddy about it.

Meanwhile, the current account report missed expectations with only a 0.8 billion EUR current account surplus when analysts were expecting a 9.2 billion EUR reading.

The two reports were nothing on the GDP report though. Late last Thursday the region showed its GDP numbers, which printed a 0.1% decline for the third quarter after falling by 0.2% in Q2 2012. The numbers marked the official recession in the region since 2009. Uh-oh.

Let’s see if the euro could pare some of its losses today. Deutsche Bundesbank President Jens Weidmann’s speech at 9:30 am GMT is the only thing on the euro zone’s docket today, so keep your eyes peeled for news on Greece’s bailout and the U.S. fiscal cliff in case they move the markets again today.

Up, up, and away! The euro showed surprising resilience to start the week, posting respectable gains against its safe haven counterparts despite bad news from Moody’s. The shared currency gained 64 pips against the dollar, while snatching 50 pips away from the yen.

As it turns out, even France isn’t immune to debt rating downgrades! Yesterday, Moody’s decided to revise the debt rating of the euro zone’s second largest economy downwards to Aa1 from AAA and placed the country on negative watch. This just goes to show that no one is safe from the euro zone’s economic problems; it’s not just about the peripheral economies anymore… even the top countries are suffering!

Later today, European finance leaders are set to meet in Brussels to discuss Greece’s second financial aid payment. A lot of investors out there are counting on these guys to deliver the next payment, so if a decision isn’t reached later on, it could lead to sharp losses for the euro.