Daily Economic Commentary: Euro zone

Trading Discussion News and Economy
#1020

Despite poor retail sales figures, the euro remained within range versus the dollar, as it didn’t make any new highs or lows. Could this be the calm before the storm that may hit during the London session?

Retail sales growth for last month came in worse than anticipated, as sales fell 0.5%, which was more than twice the projected 0.2% drop. This marked the second consecutive month, and the 4[SUP]th[/SUP] time in the past 5 releases, that the figure has come in in the red. This goes to show that retail sales growth remains unstable, reflecting fluctuating demand in the euro zone.

It’s a good thing that his didn’t weigh on the euro too much, as EUR/USD just stuck within its average daily range. That could call change today though, as we’ve got the ECB rate decision coming our way at 11:45 am GMT!

Word on the street is that ECB President Mario Draghi won’t be making any changes to interest rates, but what I’m actually looking out for is any mention of negative deposit rates. Draghi has brought up this possibility in the past and it did manage to spark a ton of volatile moves in the market. Should he or any other ECB policymaker mention it again, it might just send the euro spiralling lower!

#1021

And Super Mario does it again! Thanks to ECB President Mario Draghi’s optimism about the euro zone economy, the euro was able to hustle some serious muscle against the dollar in yesterday’s trading. EUR/USD skyrocketed to a 2-month high, tapping the 1.3300 handle before closing with a 155-pip gain for the day.

The central bank head honcho took his sweet time talking about the recent improvements in the economy after it was announced that rates would be kept steady at 0.50%. According to his statement, policymakers believe that we’ll see a gradual improvement in the economy this 2013.

However, it wasn’t all about good news. Draghi made it clear that along with other options, the ECB still doesn’t rule out the possibility of negative rates. It’s just that, this time around because of the improvements in the economy, the need for such dire measures isn’t as high anymore.

We’ll probably see the euro extend its gains if we see more positive data from the euro zone. Due later today are the German trade balance (eyed at 16.5 billion EUR) at 6:00 am GMT and the German industrial production (seen at 0.0%) at 10:00 am GMT. Make sure you don’t miss them!

#1022

Ha! Who’s the loser now? Except against the dollar, the euro posted gains against most of its counterparts last Friday. EUR/USD might be 26 pips lower, but EUR/GBP inched 9 pips higher while EUR/CHF climbed by 57 pips. What the heck spurred the bulls on?

It seems like the euro bulls aren’t done celebrating Draghi’s optimism from last Thursday. If you remember, he emphasized the region’s positive growth prospects and even upgraded the ECB’s growth forecasts. Of course, it didn’t hurt that Germany’s trade balance and industrial production reports both exceeded expectations. As the largest economy in the region, any major upbeat reports from Germany would be noted by the investors.

Will the euro keep its positive vibes this week? The French and Italian industrial production will fire the opening salvo today at 6:45 am GMT and 8:00 am GMT respectively. Both reports are expected to come in higher than last month’s readings. Then, at 8:30 am GMT we’ll see the Sentix investor confidence report, which is expected to show a slightly less negative reading from last month’s figures.

Good luck trading the euro this week!

#1023

EUR/USD was able to bank respectable gains to begin the week, closing 59 pips from where it had started yesterday. It began the day at 1.3198 and closed the U.S. trading session at 1.3257.

Economic data released yesterday was mixed. On the one hand, the French Industrial Production report came in considerably better than expected, showing a rise of 2.2% versus the forecast of 0.2%. On the other hand, the Italian Industrial Production showed a decline of 0.3%, opposite the 0.1% increase the market had initially predicted. The Sentix Investor Confidence survey, too, failed to meet consensus. It printed a reading of -11.6 but the estimate was -10.0

Only one big event is lined up for the euro zone today, and that is the German Court Ruling on the constitutionality of the ECB’s Outright Monetary Transactions (OMT) policy. Most if not all market participants expect a positive verdict so focus will likely turn to the accompanying statement. The German bank could dish out some criticism as well as attach some conditions to the policy. But we’ll have to wait and hear out what the German court will actually say later.

#1024

Aaaand we have a winner! No really, we only have one winner. The euro may have reached its three-month highs against the Greenback, but it posted losses against the pound, yen, and the franc. What’s up with that?!

It’s all about uncertainty, folks! Yesterday Germany’s Finance Minister and the Bundesbank President faced off as they presented opposing views on the ECB’s Outright Monetary Transactions (OMT) program. While the Finance Minister believes that Germany has no power over the OMT, the central bank President thinks that the program could threaten the Bundesbank’s independence. Remember that without Germany’s contribution, the OMT program will be as effective as using a teaspoon to scoop water out of a sinking ship.

We’ll have to tune in for developments on that issue! Meanwhile, ECB officials aren’t helping the common currency either. At least one member reiterated the need for easy monetary policy while another hinted that the region’s current inflation levels would make it possible for the ECB to continue stimulating the markets.

Will the euro get more support from the bulls today? From 5:30 am GMT to 6:45 am GMT we’ll see France’s quarterly non-farm payrolls, followed by inflation numbers from Germany and France. Then, at 9:00 am GMT we’ll see the region’s industrial production reports. Of course, these reports could take a backseat since it’s Day 2 of the German Court’s hearing on the OMT program. Keep your eyes peeled for any market-changing news from the euro zone, aight?

#1025

There’s just no stopping the euro bulls! Once again, they pushed forward as EUR/USD climbed another 17 pips, just as EUR/JPY recouped 33 pips from Tuesday’s big drop. Will bullish momentum carry the shared currency higher today?

From the looks of it, we have the strong showing from the industrial production report to thank for the euro’s rally. According to the latest stats, output was up by 0.4% in April amid forecasts that predicted a 0.2% slide. This seems to have overshadowed the CPI reports from Germany and France, which weren’t really supportive of the euro. German CPI clocked in just as expected at 0.4%, while French CPI came in below the 0.3% forecast at 0.1%.

Today, we have the ECB monthly bulletin to look forward to, and if it’s anything like Draghi’s speech in the recent rate statement, it could show a bit of optimism for the region. Catch it at 8:00 am GMT!

#1026

Keep the pips coming! The euro chalked up another win against the dollar as EUR/USD climbed 27 pips to finish at 1.3360. What fueled its rally?

From the looks of it, we owe it all to the broad-based dollar weakness we saw yesterday, because EUR/USD didn’t really react positively to the ECB monthly bulletin.

The report, which reflected the ECB’s optimism, revealed a positive outlook for inflation, exports, and domestic demand. But of course, it also made sure to highlight the risks that the euro zone faces, such as a downturn in global and domestic demand.

In other news, Deutsche Bundesbank President Jens Weidmann warned the markets about the dangers of low interest rates. He said that it could be dangerous if central banks assume too much responsibility. Hmm… Could this be the start of a campaign of higher rates?

Today, we have CPI data on tap, and according to forecasts, we can expect the index to hold steady at 1.4%. The core CPI, on the other hand, is expected to rise from 1.0% to 1.2%. Catch these reports at 9:00 am GMT.

#1027

The euro bears ended the week with a bang as they dragged the common currency lower against its major counterparts. EUR/USD fell to an intraday low of 1.3294 while EUR/JPY capped the day with a 126-pip loss.

The lack of major data on tap made it easy for the euro bulls and bears to follow the overall risk aversion theme in the markets. It also looks like the euro bulls are starting to get tired of pushing the euro higher now that it has reached significant technical levels against its counterparts.

Will the bulls have enough motivation this week? Only the Italian trade balance data at 8:00 am GMT and the euro zone trade numbers at 9:00 am GMT are on tap today. Italy’s trade numbers are expected to deteriorate while the euro region is expected to show better trade numbers than last month.

You might also want to pay attention to Day 1 of the G8 meetings in Northern Ireland today. More specifically, watch out for any word on stimulus or anything about the G8 leaders’ opinions on the currency war.

Good luck trading today!

#1028

It looked as though the euro was going to end the day unchanged, but a strong push in the dying hours of the New York session gave it a slight advantage against the dollar. EUR/USD had spent most of the day in a tight consolidation before it popped up to finish 33 pips higher at 1.3380.

Yesterday’s trade balance report didn’t really have much of an impact on the euro, even as it came in worse than expected. The balance for the month of April printed at 16.1 billion EUR, which is well below the 21.2 billion EUR figure that many had predicted. As it turns out, a combination of a decrease in exports and an increase in imports played a role in reducing the region’s trade surplus.

Today, we have the ZEW economic sentiment reports coming out at 5:00 am GMT. The German index of the report is expected to rise from 36.4 to 38.2. Likewise, the region-wide version is anticipated to increase from 27.6 to 29.4. These indexes tend to hold more weight than yesterday’s trade balance report, so expect to see a surge in volatility if the results don’t match forecasts.

#1029

Smooth sailing for the euro, as it climbed higher for the second day in a row. After trading as low as 1.3325, EUR/USD managed to close a shade below 1.3400 to set a new high. Will the EUR bulls have enough juice today to break through the psychological level?

The ZEW economic reports gave the bulls some support, as they came in slightly better than anticipated. The euro zone version printed at 30.6, after it checked in at 27.6 last month and was projected to come in at 29.4. Meanwhile, the German edition climbed from 36.4 to 38.5, and surged past the estimate of 38.2.

What held the euro back yesterday though, were comments by ECB head honcho Mario Draghi, who said that the central bank was considering “non-standard measures” to help boost the economy. Yes, that includes negative deposit rates homies! For now though, Draghi and his minions will look at all data before deciding to add additional stimulus measures to the economy.

No biggies on tap today, so we might just see consolidation take place until late in the New York session, when the FOMC statement takes place. Hit up Forex Gump’s latest post for the 411 on this June’s FOMC statement!

#1030

Just when it seemed like it was a quiet day for EUR/USD… BAM! Fed Chairman Bernanke made a big announcement during the FOMC statement and pushed the pair around 150 pips down. What happened?

Apparently, Big Ben declared that the U.S. central bank might get started with its tapering down process by the end of the year. With no major reports on the euro zone’s schedule, the euro ended up giving way to dollar strength.

For today, the euro zone is set to release a bunch of PMI readings from France’s and Germany’s manufacturing and services sectors. Both economies are projected to show slight improvements in their PMI reports, although most figures are still expected to stay below the 50.0 mark. The German flash services PMI is estimated to climb to 50.1, which would indicate that the industry expanded this month. Keep an eye out for these reports starting 8:00 am GMT, as stronger than expected data could keep the euro afloat.

#1031

Geronimooo!!! The euro fell heavily against its counterparts yesterday as risk aversion and concern for the region hit the markets. EUR/USD dropped to an intraday low of 1.3161 while EUR/GBP fell by a whopping 136 pips.

Yesterday the euro zone printed France, Germany, and the region’s manufacturing and services PMIs. While most of the reports came in better-than-expected, what caught the investors’ attention was that Germany’s manufacturing PMI missed its expectations. Not only that, but its producer prices also printed a lower growth rate than what we had expected. Remember that Germany is the euro region’s largest economy. Concerns about its manufacturing, exports, or producer prices is likely to make more than a few investors wary over the whole euro zone’s growth.

After the data dump yesterday the euro zone will end the week with only a current account report due. Scheduled at 8:00 am GMT, the report is expected to print at surplus of 15.1 billion EUR, lower than last month’s 25.9 billion EUR reading. The ECOFIN meetings are still ongoing though, so you might want to be at the edge of your seats for that!

#1032

The euro lost to its major counterparts for a second day in a row as concerns for political and economic stability in the euro zone gripped the markets. EUR/USD, EUR/GBP, and EUR/JPY all closed below their open prices with EUR/USD dropping as far as 85 pips.

Only the positive current account data was scheduled for release in the euro region last Friday, but the investors reacted more to the IMF’s threats to suspend funding for Greece as well as the overall dollar rally that was seen across the board. With bond yields rising and equities markets popping up red numbers, the high-yielding currencies didn’t stand a chance!

This week will be a busy one for the euro as a couple of German reports are on tap. In fact, the German IfO business climate data is scheduled today at 8:00 am GMT, followed by its consumer climate, import prices, employment data, inflation, and retail sales over the next couple of days. Be on the lookout for these reports, will ya? Word around the hood is that the euro could see more losses if the next German reports continue to surprise to the downside!

#1033

Due to data mostly coming within expectations, EUR/USD managed to get a little bit of reprieve yesterday. The bleeding of the pair stopped, as it found support around the 1.3060 level. EUR/USD began the day at 1.3095 and closed the day slightly higher at 1.3123.

As I said, data came in as expected. The German Ifo Business Climate survey printed a reading of 105.9, which was mostly in line with the forecast of 106.0. It was also slightly higher than the previous month’s reading of 105.7.

Euro zone has nothing on its economic cupboard today, but the U.S. has some tier 1 data scheduled for release that could indirectly affect the euro’s price action. Namely, the Durable Goods Orders, the S&P/CS House Price Index, the CB Consumer Confidence survey, and the New Home Sales report will all be released. They’ll start coming out at 12:30 pm GMT, so stay tuned for them.

#1034

Looks like the day belonged to the bears again! While the euro didn’t move much on the day, it did finish weaker against its two major counterparts. EUR/USD slid to 1.3098 after opening at 1.3123, just as EUR/JPY slipped 8 pips to finish at 128.06.

The euro might’ve been able to keep its head above water if Mario Draghi had been more optimistic with his speech. Unfortunately, he only reminded the markets of the challenges the euro zone faces, saying that the ECB will need to maintain an accommodative stance considering the economic outlook for the region. Bummer, dude! Looks like the ECB isn’t considering an exit strategy yet!

Up ahead, we’ve got the GfK German Consumer Climate index coming out, and analysts believe it’ll rise from 6.5 to 6.6. If results print strongly above forecasts, it might just help the euro recoup some of its losses. Catch the report at 7:00 am GMT, homies!

#1036

Tough luck for the euro! Thanks to comments by ECB head honcho Draghi, the euro took a hit in yesterday’s trading matches. EUR/USD slipped past key support at 1.3050 and tested the big 1.3000 level. The question is, will it hold?

Once again, Draghi took a very cautious tone in a speech yesterday, as he said that with the current outlook of the economy, the current policies in place are just right. He also said that the ECB is ready and willing to do whatever it takes to support the economy, which basically just means that he doesn’t mind keeping rates low, or even introducing other measures if necessary.

The markets didn’t quite like what he said, and responded by unloading some of those long EUR positions.

In other news, the GFK German consumer climate report came in slightly better than expected, printing at 6.8. Not only was this higher than the anticipated 6.6 figure, but it also marked an improvement from last month’s 6.5 reading.

For today, we’ve got more economic data headed our way from Germany in the form of the unemployment change report. Word on the street is that 7,000 jobs were cut last month. Should this figure come in lower than anticipated, it could give the euro bulls some juice to recuperate some of their recent losses.

#1037

In a surprising turn of events, the euro managed to get a little bit of reprieve yesterday. The currency was able to stop the bleeding and actually turn higher versus the dollar. From EUR/USD’s opening price during the Tokyo session, the pair rallied as high as 1.3056 before settling at 1.3041. The pair gained 41 pips overall for the day.

The pair gained support due to the better-than-expected German labor report. The report showed that the unemployment rate in the country has declined to 6.8% in May from 6.9% the month prior. It also revealed that the number of jobless people fell by 12,000, which was opposite the 8,000 increase the market had initially priced in.

More data from Germany will be coming your way today. At 6:00 am GMT, Germany’s retail sales report will be released. It’s anticipated to show a gain of 0.4% month-on-month (translates to 0.2% year-on-year). German preliminary inflation data will also be released. Inflation is anticipated to rise to 1.7% from 1.5%.

Let’s see if the positive expectations will be able to provide some much-needed boost for the falling EUR/USD again today!

#1038

The euro was all over the charts last Friday despite the release of better-than-expected reports from the euro region. EUR/USDand EUR/CHF closed below their open prices while EUR/GBP and EUR/JPY both finished the day with gains. What the heck happened?!

The euro probably could have posted more gains if investors only had eyes for economic data. Germany’s inflation and retail sales as well as France’s consumer spending numbers all surpassed expectations and supported Draghi’s statements that the euro economy is slowly gaining ground.

Unfortunately, the dollar and the franc also performed well across the board as many traders took profit by the end of the month.

Will we see more euro action today? The euro region will kick off with Spanish, Italian, and euro zone manufacturing PMIs at 8:00 am to 9:00 am GMT, followed by the euro zone’s employment numbers at 10:00 am GMT. The reports are generally expected to come in stronger than their readings last month, so be extra careful about potential downside surprises!

#1039

With positive data out of the euro zone, the euro strut through the charts with so much swag like Robin Thicke. Yesterday, it was able to pare its loss to the dollar on Friday when EUR/USD closed higher at 1.3065 after opening at 1.3020. Meanwhile, EUR/JPY finished with an 81-pip gain at 130.11.

The final EZ manufacturing PMI reading for June was upwardly revised to 48.8 from 48.7. At the same time, manufacturing PMIs out of Spain and Italy topped market expectations. Spain’s PMI came in at 50.0 (printing its first expansionary reading in 2 years!) while the consensus was at 48.9. That of Italy was at 49.1, higher that the 47.8 figure that analysts estimated. Meanwhile, the unemployment rate for May came in better than expected at 12.1% versus the 12.3% forecast.

Today, a couple of reports are scheduled for release for the euro. Given how yesterday’s roster moved the shared currency, I wouldn’t be surprised to see some volatility on the euro following the release of the reports we have today. So make sure you don’t miss them!We kick things off at 7:00 am GMT when the Spanish unemployment change report for June is released. It is seen to come in at -83,500. Then at 9:00 am GMT, the PPI report for May is eyed at -0.2%.

#1040

After a few days of reprieve, EUR/USD returned to its downtrend yesterday and fell to its lowest level in one month. The pair began the day at 1.3064 and found itself sitting 88 pips lower at 1.2976 by the end of the New York trading session.

The pair took a dive due to the resignation of Portugal Foreign Minister Paulo Portas. The news was taken by the market as bearish for the euro, as it could further destabilize the already frail coalition government. Since its formation in 2011, it has been riddled with criticism due to unpopular austerity measures implemented to meet international bailout requirements.

Data from the euro zone was mixed. On the one hand, the Spanish Unemployment Change came in significantly better than expected, showing that the number of jobless people fell 127,200 in June. The forecast was for only an 83,500 reduction. On the other hand, euro zone’s Producer Price Index for the month May failed to meet forecast. It printed a decline of 0.3%, which was slightly lower than the 0.2% decrease initially anticipated.

No high impact reports on euro zone’s calendar today, but there are a couple tier 2 events. Starting at 7:15 am GMT, Services PMIs from Spain, Italy, and other members of the euro zone will publish. Then, at 9:00 am GMT, euro zone’s retail sales report will come out. It’s projected to show a 0.4% gain, opposite the 0.5% decline seen the month before.