Daily Economic Commentary: Euro zone

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.

Despite the potential market-moving reports that popped up yesterday, it’s all very ho-hum in the euro region. The common currency ended the day almost unchanged against the Greenback, while it ticked 46 pips higher against the yen. What happened to those reports?

As I mentioned yesterday, investors were at the edge of their seats over the euro leaders’ decision on Greece’s bailout. But the announcement was postponed and now they have nothing to do but wait some more. The disappointing German PPI report weighed on the euro for a while though, as it highlighted the possibility of a slowdown in the region’s growth drivers.

Even the Fed members’ speeches didn’t move the euro. Though three Fed heads spoke in conferences yesterday, they didn’t hint at what they’re going to do in the near future.

The only report scheduled today is the German 10-year bond auction. If Germany ends up paying higher yields, then we might see the euro take a hit against its counterparts. Of course, also keep your eyes peeled for the big announcement on Greece, as we could see heavy euro selling if the EU leaders disappoint.

It’s in the green, folks! After ending the previous day in a stalemate against the Greenback, the euro was able to push for some gains yesterday, with EUR/USD closing at 1.2824. EUR/JPY was able to extend its winning streak to 3 days as it ended the day at 105.79.

The euro zone didn’t release any economic reports yesterday as traders were all eyes and ears on the Greek debt decision from the EU finance ministers. However, the leaders mentioned that they need to set another meeting next week in order to figure out the rest of the details of the bailout package. German Chancellor Angela Merkel did say that they’ve made progress when it comes to securing more aid for Greece and these remarks were enough to lift the euro’s spirits yesterday.

Today, the euro zone is set to release a bunch of PMI figures from the manufacturing and services sectors of France and Germany. These figures are expected to start coming in by 9:00 pm GMT so brace yourselves for some volatility among the euro pairs by then. Based on the estimates in our economic calendar, it appears that the industries are expecting slight improvements for October, although they are projected to remain in the contractionary zone. Keep your eyes and ears peeled for the actual results!

Looks like the euro bulls have plenty to be thankful for, as it beat the stuffing out of its major counterparts. EUR/USD rose to as high as 1.2900 before finishing at 1.2883, up 59 pips on the day. Meanwhile, EUR/JPY edged 41 pips higher to end at 106.20.

Apparently, the bulls completely disregarded the euro zone, German, and French manufacturing and services PMIs, which printed mixed results. Nevertheless, I just wanna point out that ALL of them remain below the key 50.0 mark, indicating contraction in those sectors.
 
Instead, the markets focused on the slightly better-than-expected Spanish bond auctions, where yields were lower than previous auctions, and the government was able to sell 3.88B EUR worth of bonds, just more than 3.50B target. Talk about gravy, baby!
 
But the main reason why the euro remained afloat is because of increased optimism from German officials that Greece will receive its bailout funding. [Chancellor Angela Merkel](http://www.babypips.com/forexpedia/Angela_Merkel) even said that a deal centered around additional funding and lower interest rates could be struck as soon as Monday, when the Eurogroup is scheduled to meet.
 
For today, we've got the German IFO business climate index due at 9:00 am GMT. Expectations are that the index will print at 99.6, slightly below the 100.00. This report is basically a measure of how business managers view the current economic landscape. Take note that it has been trending lower over the past year, and that in 5 of the past 6 releases, it has actually printed worse than expected. If that happens again today, it could trigger a sell-off in euro pairs.

The euro was a huge hit on Black Friday as euro bulls bought up the currency until EUR/USD closed 29 pips shy of the 1.3000 handle. EUR/JPY also had a stellar rally as it closed more than 40 pips above its 105.79 open price.

One of the main reasons for the euro’s rally was the stronger than expected German Ifo business climate reading for November. The figure climbed from 100.0 to 101.4 instead of falling to 99.6. This shows that business confidence in euro zone’s largest economy unexpectedly improved this month and marked its first gain in more than half a year.

This was enough to put the euro in a good mood last Friday, despite the disappointing conclusion to the EU summit. Apparently, the meetings still ended with no real progress as EU officials failed to reach a deal on their budget plans for the region. They rescheduled another meeting for next year so they could better negotiate their proposals and hopefully come up with an agreement.

Today, the Eurogroup is set to resume their discussions on Greece’s debt. Recall that EU finance ministers were also unable to come up with a deal on what to do with Greece’s swelling deficit that they had to call it a day and start a new round of talks this week. Keep your eyes and ears peeled for any updates because an agreement among the finance officials could spark a risk rally!

Not much action on euro pairs to start the week. While traders awaited the official decision on Greece’s debt deal, the shared currency showed little activity and spent most of the day trading sideways. In fact, at the end of the day, EUR/USD finished right where it began at 1.2961.

Just hours ago, the euro zone and the IMF finally came to an agreement on the next installment of Greece’s emergency aid. After much debating, it was decided that Greece will have to cut its debt-to-GDP ratio to 124% by 2020.

Surprisingly, this hasn’t been the big market-mover that many thought it would be. A possible explanation for the market’s unresponsiveness could be that the decision had already been priced in over the past few days. But then again, it’s still very early in the day and we may see a more violent reaction in the London and New York sessions. In any case, it looks like we’ll soon finally be able to put this Greek debt drama behind us… at least for the next 3 months!

In other news, the GfK German Consumer Climate report came out and it failed to meet expectations. Forecasts had the index coming in at 6.3, up from 6.1. But instead, November only earned a reading of 5.9 as consumer morale dipped slightly heading into the holiday season. Whatever happened to having a holly jolly Christmas?!

Nothing on the economic calendar from the euro zone today, but watch out for a delayed reaction to the Greek debt deal in the London and New York sessions! Good luck and may the pips be with you!

Boy, oh boy! Is the euro in for trouble? Despite EU finance ministers finally coming up with a financial deal on Greece, the shared currency finished the day lower against most of its counterparts. EUR/USD ended the day at 1.2934 after opening at 1.2962. Meanwhile, EUR/JPY closed with a 23-pip loss at 106.27.

What we saw yesterday was a classic “Buy the rumors, sell the news” reaction from the markets. After days of anticipation, it seemed like investors finally came around to their senses and realized that another bailout package for the debt-ridden country is nothing but a band-aid solution. Naysayers think that its only a matter of time until Greece ask the Troika again for more money.

This time around, the Troika will grant Greece a 43.7 billion EUR loan which will be shelled out in stages. It was also agreed that interest rates for Greece would be reduced and that maturity on existing bonds will be extended by 15 years.

Of course, the bailout package comes at a price. In exchange, Greece will have to reduce its debt-to-GDP ratio to 124% by 2020.

Today, our forex calendar is blank for top-tier reports from the euro zone. With that said, don’t be surprised to see the euro react to news regarding Greece as well as Spain. I have a feeling that the two countries’ balance sheets would be the focus of the markets in the coming days.

The euro came under selling pressure early in the day on Greek debt deal concerns, but thanks to a last minute rally late in the New York session, it was able to salvage a draw against the dollar. After dipping to as low as 1.2880, EUR/USD ended the day just 2 pips lower at 1.2932.

Now that investors are done worrying about whether or not Greece will get its next install of emergency aid, they’ve moved on to worrying about how it will implement reforms to meet its debt deal requirements! Obviously, obtaining a debt-to-GDP ratio of 124% by 2020 is no small task. Greece will have to make some serious changes to spending and taxing to reach its target, which might not go so well with Greek citizens. Remember how they protested on the streets the last time Greece approved budget cuts?

The truth of the matter is that in no way does this debt deal save Greece from its economic problems. If you really think about it, the euro zone is just buying Greece more time with this band-aid solution.

Looking ahead, we’ve got German unemployment change data on tap at 8:55 am GMT. Look for the month of October to deliver an increase of 15,000 in joblessness, down from 20,000 in September.

Thanks to positive German data and lower peripheral bond yields, the currency bulls bought the euro like there was no tomorrow. EUR/USD tested the 1.3000 handle once again, while EUR/JPY enjoyed a nice 60-pip rally.

Germany started the bulls’ party yesterday when it showed that only a net of 5,000 workers, not 16,000, were unemployed in November. The numbers suggested that the region’s economic driver wasn’t slowing down as fast as investors feared, so many euro bulls came out and played yesterday.

Italy and Spain also pulled their weight in the euro rally when Italy successfully auctioned its 5 and 10-year bonds and got the lowest yields in two years. Meanwhile, Spain’s bond yields dropped to 5.25%, its lowest level since April.

Today we’ll see more data from the region’s economies, starting with the German retail sales numbers at 8:00 am GMT, followed by France’s consumer spending data at 8:45 am GMT.

ECB’s Draghi will then take the spotlight at 9:00 am GMT with his speech in Paris, but Italy’s employment numbers might gather attention at 10:00 am GMT. Last but not the least, the euro zone’s CPI and unemployment numbers will be printed at 11:00 am GMT. Make sure you stick around to trade these reports!

And the bull party continues! Despite the ridiculously weak data from the euro zone, the euro continued to chalk up gains against its counterparts. EUR/USD ticked another 25 pips higher while EUR/JPY jumped by 57 pips. Yowza!

Data from Germany and France should’ve made the euro bulls run and hide last Friday. Germany failed to follow up its better-than-expected employment numbers when its retail sales contracted by 2.8% in October, a far cry from the expected 0.3% uptick. Meanwhile, France’s consumer spending missed its mark at -0.2% against the expected -0.1% rate. Last but not the least, the region’s unemployment rate rose to 11.7% in October, another record high. Yikes!

Lucky for the euro bulls, investors were focused on Germany’s approval of the Greek bailout deal as well as the yen shorts that poured over to the other high-yielding currencies.

Has the common currency used up its good vibes? At 9:15 to 10:00 am GMT today we’ll get hold of the Spanish, Italian, and final manufacturing numbers from the region. Other potential blockbusters this week include the Spanish employment numbers due tomorrow at 9:00 am GMT, services PMI and Spanish 10-year bond auction on Wednesday, the ECB’s interest rate decision on Thursday, and the big NFP report on Friday.

Enjoy trading this week, fellas!

Now that’s how you start the week with a bang! The euro flew up the charts, with EUR/JPY gaining 40 pips to finish at 107.38, while EUR/USD closed a solid 82 pips higher at 1.3058.

Oddly enough, the euro didn’t get much help from Spanish, Italian, and euro zone PMIs, which pretty much came in as expected. The Spanish report printed at 45.3, while the French and euro zone versions came in at 45.1 and 46.2, respectively.

Instead, the euro bulls pounced on poor data from the U.S., allowing the shared currency to tear up the Greenback. Make sure y’all hit up my U.S. commentary to find out what the heck happened to the scrilla yesterday!

Looking ahead, all we’ve got is the Spanish unemployment change report headed our way at 8:00 am GMT. Two months ago, 128,200 jobs were lost, while last month, another 90,000 are expected to be out of employment. A better-than-expected figure would be necessary for the euro bulls to build on yesterday’s momentum.

Euro bulls celebrated on the charts like boys getting giddy over the Victoria’s Secret fashion show. EUR/USD traded higher all throughout the day, opening at 1.3052 and finishing the day at 1.3095.

For the most part, traders were still happy about the fact that Greece got bailed out and eliminated the risk of an immediate default not only for Greece, but also Spain. Of course, it also helped that Spanish unemployment came in much lower than expected. Only 74,300 people were reportedly unemployed in November, beating expectations at 90,000.

Today, we have a few economic reports on tap. We start off with 9:15 am GMT with the Spanish services PMI (no forecast available) and the Italian services PMI at 9:30 am GMT with the consensus at 46.0. It will then be followed with the final EZ services PMI for October anticipated at 45.7.

At 11:00 am GMT, euro zone’s retail sales report for October will be released and analysts have estimated it to come in at -0.1%.

Make sure you’re on your toes when they’re released ayt? Better-than-expected figures could fuel the shared currency’s rally so don’t miss them!

Party’s over, boys! After days of rallying against the dollar, EUR/USD finally showed weakness and capped the day 20 pips below its open price. What the heck dragged on the euro anyway?

It seems that the euro investors weren’t too happy about the region’s retail sales numbers, which showed a 1.2% decline in October when analysts were only expecting a 0.1% downtick. It also didn’t help that the Spanish bond auctions wasn’t successful enough to suggest lower bond yields in the near future.

Will the euro bulls have a chance to get their mojo back today? Aside from the revised GDP report at 11:00 am GMT and Germany’s factory orders at 12:00 pm GMT, traders will be at the edge of their seats for the ECB’s monetary policy decision.

The central bank will publish their December interest rates at 1:45 pm GMT, which will be followed by Super Mario Draghi’s press conference at 2:30 pm GMT. While no one is expecting a change in the bank’s rates, some are looking for downward revisions in growth estimates as well as optimistic remarks regarding the region’s debt crisis.

Don’t even think of missing out on these reports!