Daily Economic Commentary: Euro zone

Is that a rebound I see? Why, yes it is! The euro, after dropping more than 500 pips against the dollar in the last five days, managed to finally stabilize yesterday. EUR/USD closed the U.S. trading session at 1.3973, just 36 pips lower from its opening price during the Asian trading session. While still a loss, it wasn’t as bad as the last couple of days!

Since economic data released from euro zone was largely unimpressive, the bounce we saw yesterday could simply be a result of traders taking profit on their EUR/USD shorts.

Today, at 9:00 am GMT, we will see euro zone’s industrial production report for the month
of May. The market expects industrial production to have increased by 0.5% for May, a slight improvement from the 0.2% increase seen in April.

Alright folks, that’s about it for the euro zone! There are a lot of reports coming out of the U.S. so make sure you also check out my U.S. economic roundup too!

Has the euro passed the “biggest loser” crown to the dollar? Yesterday markets decided to take a breather on selling the euro and focused instead on the dollar weakness brought about by Bernanke’s surprisingly bearish statements. After hitting an intraday low of 1.3951, EUR/USD recovered and posted a 167-pip gain near the 1.4140 mark. What’s up with the rally?

Well, it seems that the traders were spooked by Bernanke when he surprisingly admitted that the Fed isn’t done shelling out economic stimulus just yet. Since the economic recovery was more sluggish than the Fed has expected, Bernanke announced the possibility of more stimulus probably in the near future.

But that doesn’t mean that the euro is off the hook! Yesterday the euro zone pumped out its industrial production report for May, which clocked in a 0.1% growth, which is weaker than the expected 0.5% rise. Meanwhile, Germany’s wholesale price index also weakened by 0.6% in June after stagnating at 0.0% in April.

For today traders will most probably keep watch on more reports from the U.S. as well as the euro zone. Aside from news on a possible debt contagion in the region, the euro zone is also scheduled to release the ECB’s monthly bulletin at 8:00 am GMT, followed by the CPI reports at 9:00 am GMT. Watch your trades closely on these reports!

The euro had a topsy-turvy day yesterday as it tried to hold on to its recent gains against the Greenback and the Japanese yen. EUR/USD sank below the 1.4200 major psychological handle and closed at 1.4131 while EUR/JPY managed to end 15 pips below the 112.00 mark. Could the euro be getting jittery about the upcoming stress test results?

Euro zone CPI came in line with expectations as it showed a 2.7% annual reading while core CPI beat the consensus and chalked up a 1.6% year-over-year increase. However, this wasn’t enough to boost the euro against the Greenback. Apparently, Big Ben decided to talk down the possibility of QE3, which caused a huge dollar selloff the other day. Because of that, the euro was forced to return most of its recent gains against the U.S. dollar.

Another factor that probably contributed to the euro’s decline yesterday was the upcoming bank stress test results. Traders decided that it was best to take profits off their long euro positions before the stress test results are released around 4:00 pm GMT today. Rumor has it that 15 out of the 90 banks included in the tests failed. Uh oh, the euro might be in for another drop if the actual results show that even more banks failed the stress tests. Stay on your toes!

And 1.4100 holds! Due to the absence of high profile economic data from euro zone, EUR/USD didn’t experience a lot of action last Friday. The pair simply traded within a relatively tight 100-pip range. It found resistance at 1.4200 and bottomed out at the 1.4100 level. by the end of the U.S. trading session, EUR/USD sat at 1.4148, barely changed from its Asian session opening price at 1.4143.

This week, euro zone’s economic calendar presents a couple of reports of interest.

The first one is the German ZEW economic sentiment survey. Scheduled to be released on Tuesday at 9:00 am GMT, the survey is expected to print -11.4, slightly worse than the -9.0 figure seen the month before.

Then, on Thursday at 8:00 am GMT, euro zone will release the manufacturing and services PMIs. The market is expecting a reading of 51.6 reading for the manufacturing sector (down from 52.0) and a reading of 53.2 fromom the services sector (down from 53.7).

On Friday, the German IFO business climate survey takes the spotlight. The report normally has a strong impact on the euro, so keep a close eye on that one. The survey is slated to tick down to 113.7 from 114.5 the month before.

In other news, the European bank stress tests turned to be better than expected as only 8 banks failed. Prior the release of the results, there had been rumors that 15 banks would fail. ECB Council Member Ewald Nowotyny indicated that IF the markets were rational, the results should calm the markets. Hah, rational is probably the last thing the market is!

In any case, do be careful this week as sentiment could shift on a dime. Good luck!

Contrary to Jessie J’s hit Price Tag, traders still think it’s all about the money for the euro region. The euro fell early in the day, but recovered in the later sessions, with EUR/CHF closing 121 pips higher at 1.1543 and EUR/USD forming a dragonfly doji at 1.4112.

No economic reports were released from the euro zone yesterday, but worries over Greece’s bailout and potential contagion effects on the other PIIGS nations continued to loom over the markets. Since the relatively positive stress tests didn’t entice traders to buy up the euro like they were Harry Potter tickets, the euro zone leaders are now scrambling for other methods to calm investors.

Word around the hood is that they will have a meeting this Thursday to finalize Greece’s second bailout package worth 110 billion EUR. If significant progress is made during the meeting, then we just might see the euro hustle more muscle in the charts.

While waiting for the meeting on Thursday you might want to watch the German ZEW economic sentiment report coming out at 9:00 am GMT, followed by the whole region’s ZEW sentiment report. Both figures are expected to print worse readings than June’s numbers, but stay glued to the tube for any surprises!

Even though the euro zone printed a couple of downers (a.k.a. yesterday’s ZEW reports), the euro was able to post decent gains against its major counterparts, chalking up victories against the dollar, yen, and Swiss franc. Will we get a repeat performance today?

Surprisingly enough, the markets didn’t seem to pay much attention to weak ZEW economic sentiment data. The German ZEW report only managed to print a reading of -15.1, which is just plain ugly compared to the -11.8 consensus forecast and the previous month’s record of -9.0. The euro zone-wide report wasn’t much better as it ticked down from -5.9 to -7.0 in July.

In other news… way to shatter everyone’s dreams, Angela Merkel! The German chancellor basically shot down everyone’s hopes when she said we shouldn’t expect a ground-breaking solution to the European debt crisis to materialize this Thursday.

Officials from the IMF also bummed everyone out when they reminded the markets about the consequences of default and risks of contagion. It’s for this reason that the euro gave up some of its gains late in the day. What party poopers!

Today, we only have a couple of lightweight reports on tap. At 6:00 am GMT, German PPI data is due and is slated to show a rise from 0.0% to 0.1%. Then at 2:00 pm GMT, we take a look at euro zone consumer confidence, which is forecasted to earn a reading of -10 for the third month in a row.

Keep in mind that neither of these reports will probably do much to shake up the markets, but they could spark a mini selloff or rally in the event that they print crazy numbers.

And the euro zone debt saga continues! Expectations for a successful euro zone leaders’ meeting today gave the euro a lift yesterday, boosting EUR/USD 81 pips to 1.4226. Never mind that economic reports were also released from the region! Will we see another rally today?

Though the Germany released a slightly better than expected PPI report and a disappointing consumer confidence data, all eyes were on the recent developments in the Greek debt situation.

If you remember, German Chancellor Angela Merkel tried to tone down the expectations for today’s euro zone leaders’ meeting. Too bad some euro zone leaders can’t wait to share their opposite sentiment! Word around the fx-hood is that many officials are expecting a significant development from the meeting, especially when concrete options have been laid on the table.

So, do you think that the positive results have been priced in already? Though the results of the economic summit won’t be released until later, we can’t deny that it’s what investors will be keeping close tabs on. Meanwhile, if you’re into trading the news, then you might want to get ready for the parade of euro zone economic reports coming our way today.

The show will start at 7:00 am GMT when France releases its manufacturing and services PMI. The next act belongs to Germany as it releases similar reports at 7:30 am GMT. Then, the whole euro region will cap the reports at 8:00 am GMT with its own manufacturing and services PMI, along with the area’s current account report.

Of course, the finale will still belong to the euro zone leaders as some of them will probably sneak in a few interviews right after the meeting. Will the meeting be as successful as many of them have projected, or is the market in for another disappointment?

Stay glued to the tube for these reports!

Talk about a strong case of market optimism! EUR/USD managed to stage a magnificent rally in yesterday’s trading session after euro zone leaders finally agreed on a plan to bail out the debt-ridden Greece. From its intraday low at 1.4138, EUR/USD soared to close the day strongly at 1.4378.

The new bailout package plans to extend the loan maturities (an additional 7.5 to 15 years) and lower the interest rates (around 3.5%) of troubled euro zone nations such as Greece. The new bailout package also states that Greece will be handed a cool 159 billion EUR. Needless to say, the move of the euro zone financial leaders calmed the market’s fear of a possible debt contagion.

Economic data released from the euro zone didn’t share the overall positive tone though. The flash manufacturing PMI came in weaker than expected at 50.4 while the flash services PMI reading was only at 51.4, lower than the 53.2 initially predicted. Meanwhile, the current account balance showed a 5.4 billion EUR deficit, much higher than the 4.8 billion EUR deficit forecast.

Today, the important economic release to watch is the German IFO business climate survey. The market is anticipating a reading of 113.7, slightly lower than the 114.5 reading seen the month before. The actual figure will print at 8:00 am GMT later.

Alright, that’s it for today! Good luck trading homies!

After Thursday’s wild events, Friday was much more subdued for the euro. Euro pairs pretty much stayed in range, as a “selective default” didn’t exactly weigh down the shared currency. EUR/USD finished just 10 pips lower on the day, closing at 1.4368, while EUR/JPY finished at 112.70, down just 7 pips from its opening price.

Ratings agency Fitch gave a Greece a selective default rating, just a day after European leaders handed Greece a second bailout. However, we didn’t really see a euro sell off, as the default rating is expected to be temporary. Once Greece issues a new set of bonds, Fitch could raise the rating back to junk status. In any case, the markets are still high on the potential reforms to the EFSF and the creation of an European Monetary Fund.

In other news, we got mixed results from Friday’s data. The German IFO business climate report came in cooler than expected, printing a score of 112.9. The report was expected to hit 113.7. This indicates that business managers are feeling just a bit less confident about state of the euro zone.

We did get better news later in the day, as industrial new orders reportedly jumped up by 3.6% in May, far greater than the anticipated 0.7% uptick. Furthermore, this marked the first time in over 4 months that the report didn’t print a disappointing result.

No biggies on the docket today, so we may see some more ranging to begin the week. If you’re the type who likes to scalp, playing off support and resistance levels may be the way to go today!

Ho hum, the euro simply moved sideways against the U.S. dollar and the Japanese yen yesterday. EUR/USD ended slightly down from its 1.4384 open price while EUR/JPY chalked up a tiny 10-pip gain from its 112.43 open. Let’s take a look at today’s set of reports to see whether the euro can find a clearer direction or not.

The markets seemed unfazed over the credit rating downgrade that Moody’s gave to Greece yesterday. Their sovereign debt was downgraded from Ca to Caa1, which means that the country is most likely going to default on its debt. Nothing new, really.

The euro was also unhurt by the worse than expected business climate reading in Belgium, which showed that the index fell from -1.1 to -2.5.

Today, Germany will release its GfK consumer confidence index at 6:00 am GMT. The reading is estimated to dip from 5.7 to 5.6 this month, but we could be in for a bigger drop considering the negative impact of the debt problems in the region. Be careful if you’re trading the news!

No news is good news! Well, at least for the euro it was! Without any new updates on the Europeans debt crisis to worry investors, the euro was able to stage a relief rally against its major counterparts. EUR/USD rose 144 pips to climb above the 1.4500 handle while EUR/JPY gained 56 pips to finish above 113.00.

With the markets distracted by concerns over the U.S. debt ceiling, the euro sneakily stole some pips across the charts. It also helped that spreads in the EU are finally signs of stability.

As for yesterday’s lone report, well, it wasn’t much of a market-shaker. The German GfK consumer confidence index crept down from 5.6 to 5.4 as the debt crisis bogged down consumer sentiment and overall willingness to buy in July.

Today, we have German preliminary CPI data on tap. Now, I wouldn’t advise you to trade the news with this report as this probably won’t do much to move the euro. But it would be wise to take note of it as a high German CPI could lift the euro zone-wide CPI. Look for inflation in Germany to rise from 0.1% to 0.3% in the month of July. Good luck, kids!

thanks pipdiddy

Geronimoooo! The euro plunged in the charts yesterday as risk aversion swept the markets and sent higher-yielding currencies lower. EUR/USD closed 141 pips lower at 1.4374 while EUR/JPY ended the day down to 112.11 from its opening price of 113.09.

Although the U.S. debt ceiling continued to dominate headlines, Europe’s problems also didn’t escapre investors’ attention. Standard and Poor’s downgraded Greece’s credit rating from CCC to CC and issued a negative outlook. They even warned that investors may only get back probably around 30% to 50% of their investments. Yikes!

Perhaps all the gloom-and-doom talks were too much for investors to handle. Heck, the Dow Jones even plunged almost 200 points yesterday!

On the economic front, we saw mixed numbers from Germany which did very little to help the euro. German import prices for July declined by 0.6% and disappointed the consensus which was for it to remain flat. Meanwhile, the country’s preliminary CPI report showed that inflation rose by 0.4% and beat the forecast by 0.1%.

Today only the jobs report from Germany for June is on tap at 7:55 am GMT. Analysts are expecting to see that the change in the number of unemployed people totaled to 15,000 while the unemployment rate is seen to have remained steady at 7%.

Aside from that, make sure you get a good feel of market sentiment and gauge which direction the euro is headed. Keep in mind that it usually rallies when risk appetite picks up.

It was just one of THOSE days for the euro. Once again, it came under selling pressure as weak economic data and European debt concerns bogged down the shared currency. While EUR/USD slid 65 pips, EUR/JPY fell 84 pips, finding support at the 111.00 handle.

The markets have been abuzz with U.S. debt ceiling talks, but yesterday, they showed that they haven’t quite forgotten about the EU’s own debt problems. Disappointing results from Italy’s bond auction pushed Italy credit default swap spreads higher, indicating that the markets are as jittery as ever even with Greece receiving a second bailout. After all, Greece may be in the clear for now, but Italy is still not out of the woods. Hmm… This makes me wonder: Is there anything the ECB can do to ease fears?

As for yesterday’s lone economic report… well, the German employment data was just as disappointing! The number of unemployed people slid by 11,000 in July, which is not quite the 15,000 decline that markets were expecting to see. German unemployment has dropped for 25 straight months now, but we’re starting to see signs of it hiring slowing, which means that maybe employment is nearing its peak in Germany.

Up ahead, we’ve got a few tier 2 reports coming our way. At 6:00 am GMT, German retail sales (1.6% forecast vs. previous -2.8%) will be available. A few moments after that, at 6:45 am GMT, French consumer spending data (0.4% forecast vs. previous -1.5%) will be out. And last but not least, at 9:00 am GMT, we’ll have euro zone CPI (2.7% forecast vs. previous 2.7%) on tap. But remember, the U.S. is also due to roll out its GDP report today. Don’t get blindsided by that market-mover! Good luck kids!

Topsy-turvy day for the euro last Friday, as EUR/USD dropped at the start of the London session, but soon recovered on broad USD weakness during the New York session. The pair bottomed out at 1.4229, before bouncing up and closing 1.4365, up 58 pips for the day.

So what caused the euro to drop?

While German retail sales came in four times expectations and indicated sales growth of 6.3% last month, the euro zone CPI flash estimate showed inflation to be at 2.5%, less than the projected 2.7% yearly inflation. While this is still above the ECB’s mandated inflation rate, it does lessen the pressure for the ECB to raise rates sooner. And of course, everyone and everyone’s grandmamma knows what lowered rate expectations mean – less reason to buy the euro!

The other major reason why the euro dropped initially was that Moody’s put Spain’s Aa2 credit rating on negative watch! Dios mio! Naturally, this led to a euro sell off as debt contagion fears haven’t exactly left the market.

For today, the only report of important from the euro zone is the region wide unemployment report, which will be available at 9:00 am GMT. Word is that the unemployment rate is still hovering around 9.9% and with the markets concerned about the U.S. debt ceiling, I don’t think this will be too much of a market mover.

Looking ahead, the biggest mover for the euro this week will most likely be Thursday’s ECB monetary policy statement. With everything that’s going on right now, it’ll be interesting to see what ECB President Jean Claude Trichet has to say!

Not again! No thanks to risk aversion, the euro took a major hit in yesterday’s trading session. After it had hit an intraday high at 1.4450, EUR/USD dropped like a rock to close the U.S. trading session at 1.4258. All in all, the pair lost 126 pips yesterday.

The market’s aversion to risk was the result of traders’ unease over the debt deal. While the Congress and Obama were able to reach a tentative agreement over the debt deal, the market still remained cautious over the financial condition of the U.S.

The deal also didn’t mean that the U.S. sovereign credit rating wouldn’t get cut by credit rating agencies. Sometimes, it baffles me how the market can still buy the currency of a debt-laden country… but I guess that’s just how the market works!

Today, the only piece of data coming out of euro zone is the producer price index. Scheduled to come out at 9:00 am GMT, the PPI is expected to show a 0.1% gain, opposite the 0.2% decline seen the month before.

Another down day for the euro, as risk aversion continued to dominate the markets. EUR/USD dropped 50 pips to finish at 1.4208. Meanwhile, EUR/CHF made yet another all-time low, falling nearly 200 pips to close at 1.0876! Mama mia! What’s going on?!

Yields on Italian and Spanish debt have continued to rise even after Greece received another bailout, indicating that investors are still wary of the European situation. I fear that this could be a recurring theme over next few weeks, and don’t be surprised if we start hearing that another country (ahem, Spain, ahem) may require a bailout as well.

The euro also took a hit thanks to poor PPI figures, which came in flat after expectations were for a small increase of 0.1%. Remember, this is a leading indicator of inflation and if prices aren’t rising, it gives the ECB less reason for another rate hike.

Looking at our fabulous economic calendar, I see that we’ve got euro zone wide retail sales data coming in at 0.5%. Word through the forex grapevine is that sales rose a decent 0.5% this past June, which would be a nice turnaround from the 1.1% drop we saw the month before. Should the report come in better-than-expected, it could give the euro enough juice to stay afloat in today’s trading sessions.

It’s about time! Thanks to positive data, the euro was able to bag 111 pips from the dollar for the first time this week yesterday when it closed higher at 1.4319. It was also able to end its 5-day losing streak against the yen when EUR/JPY closed the day 68 pips higher at 110.21.

Yesterday we saw an upward revision to the euro zone’s final services PMI to 51.6 after being reported at 51.4. But what made the euro bulls’ day was the retail sales report for June which printed a 0.9% uptick and topped the market’s expected 0.5% forecast. Apparently, the surge in consumer spending was led by Germany.

I wonder if the German economy would continue to impress markets today when it releases its factory orders report for June which is expected to print a 0.4% decline later at 10:00 am GMT. However, I don’t think that the data would be the primary driver in the euro’s price action in today’s trading.

At 11:45 am GMT, the ECB will announce its interest rate decision. Although no one is expecting ECB head honcho Jean-Claude Trichet to holler an interest rate hike, that doesn’t mean you can just forget about it!

Make sure you stick around your charts around 12:30 pm GMT when he takes center stage for the press conference and keep an ear out for what he has to say.

As Forex Gump mentioned in his article last Saturday, recent disappointment in economic data may give the ECB a reason to sound dovish while increased inflationary pressures could be enough for Trichet to say that the bank would show “strong vigilance” against inflation.

Just remember to be careful, ayt? Good luck y’all!

Eur[o] going dooown! No thanks to the ECB’s statements yesterday and the persistence of risk aversion in markets, the euro fell sharply against its major counterparts. EUR/USD dropped by a solid 206 pips to 1.4122, while EUR/CHF also fell by 175 pips. Meanwhile, the BOJ’s currency intervention dragged EUR/JPY to an intraday high of 114.18.

Too bad the euro bulls didn’t have a chance! Though Germany printed a better-than-expected factory orders data, the ECB’s interest rate statement and press conference blocked out the optimism that the region would recover from its debt crisis anytime soon.

Aside from holding its interest rate steady at 1.50%, the ECB announced its plans to buy more bonds from financially-troubled euro zone nations. What’s more, the ECB also acknowledged that economic uncertainty had increased over the last few weeks. I don’t know about you, but those statements have “dovish” printed all over them!

Let’s see if the euro manages to trim some of its losses today when Italy releases its GDP report at 9:00 am GMT, which will be followed by Germany’s industrial production report at 10:00 am GMT. Of course, we all know that the markets will pay special attention to the U.S. NFP report coming out at 12:30 pm GMT, so y’all better watch out for it! If the report sparks a heavy round of risk aversion, then we just might see the euro fall deeper in the charts!

The euro pulled off an R. Kelly move against the dollar last Friday as it bounced-bounced, bounced-bounced off support at the 1.4100 handle. It was able to pare some of its losses when it ended the week 159 pips above the day open at 1.4122.

Although we had a few reports from the euro zone, I think a large part of the euro’s win was because of concerns over a U.S. debt downgrade.

It was reported that the French trade deficit for June was smaller at 5.6 billion EUR than the 6.3 billion EUR forecast. We also saw that the Italian economy grew by 0.3% in Q2 2011 and beat the consensus which was for a 0.2% in the GDP report.

On the other hand, the German industrial production report for June showed a 1.1% decline and disappointed the market forecast which was for a 0.1% uptick.

Now that the fears of investors have already been confirmed when S&P downgraded U.S. debt, will we see the euro rally up the charts?

Maybe. However, we have to keep in mind that problems in Italy and Spain are still there. Just be on your toes for any changes in market sentiment, ayt?

Also keep tabs on the Sentix investor confidence report for August due at 8:30 am GMT. Analysts are anticipating the report to come in at 3.6. Watch out for the actual figure as it may give investors one more reason to buy (or sell) the euro!