Daily Economic Commentary: Euro zone

Trading Discussion News and Economy
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Slow and steady is the way to go, fellas. The euro might not have followed through with its gains, but it didn’t lose out either. EUR/USD steadied at its 1.2273 open price, while EUR/JPY closed 2 pips higher than its open price after reaching an intraday high of 98.47.

I guess it’s a good thing that economic reports released from the region yesterday were able to keep the euro bears at bay! France’s industrial production clocked in a 1.1% growth in November, while ratings agency Fitch recently reaffirmed Germany’s AAA rating.

Meanwhile, EU Commissioner Rehn also made waves yesterday by announcing that Eurobonds would rival U.S. treasuries as a safe haven. Talk about taking a leap of faith!

Aside from Germany’s Angela Merkel having a meeting with Italy’s Monti today, only the region’s final GDP report at 10:00 am GMT is scheduled for release today.

Still, it doesn’t mean that you should go play with your new iphone 4s you got for Christmas! Watch out for any market-moving reports, will ya? Who knows, you just might sneak in a couple of pips from those news reports!

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With Germany showing its willingness to support the euro zone, the euro could have had it all, rolling in the pips in yesterday’s trading. But it didn’t. EUR/USD crept up to a high of 1.2791 before plunging down to end the day 66 pips below its opening price at 1.2707.

After her meeting with Italian Prime Minister Mario Monti, German Chancellor Angela Merkel hinted that her government is willing to put more money in the ESM in order to “send message to markets.” It’s not everyday that we hear such supportive remarks from Germany, however, it still wasn’t enough to fuel the euro on the charts.

It looks like traders got disappointed with euro zone’s final GDP report for Q3 2011 which showed that the region only grew by a measly 0.1% during the quarter after being previously reported at 0.2%. Of course, this got market junkies talking that if growth was so dismal then, the economy probably contracted in the final quarter of the year.

There’s also the ECB interest rate decision today which traders seem to be worried about. After cutting interest rates in December by 25 basis points to 1.00%, ECB President Mario Draghi is not expected to announce another rate cut this time around. Economic gurus feel that the central bank will wait for the effect of the cut to sink in first before another round of easing. However, with the ECB under pressure to support Italy and the negative consumer spending and investor confidence reports we’ve seen, we might hear dovish remarks that could send the euro lower on the charts. Keep an ear out for it at 12:45 pm GMT.

Aside from that, be sure to also be on your toes for the second-tier EZ industrial production report, due earlier at 10:00 am GMT. It is anticipated to print a decline of 0.2% but a better-than-expected figure may just give the euro its much-needed boost. Good luck!

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Yesterday turned out to be a really good day for the euro, thanks to ECB President Mario Draghi’s optimistic interest rate statement. EUR/USD, which began the day at 1.2707, found itself trading strongly above the 1.2800 level by the end up of the U.S. trading session.

According to Draghi, the steps that the European Central Bank (ECB) has recently taken like the interest rate cut and their support for the banking system have been working well. He also indicated that even though the economy have been deteriorating, it starting to stabilize.

On the economic front, the Industrial Production report came in with a 0.1% decline, which was slightly better than the 0.2% decrease initially expected. It was also an improvement from last month’s 0.3% fall.

No major news release from the euro today, so we could see the currency mainly moved within a range. If you look at the daily chart of EUR/USD, you’ll see that the pair has been mostly trading sideways. Keep an eye on those previous day highs and low, as they could serve as inflection levels for today!

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Surprise, surprise! The euro zone got slapped with another debt rating downgrade and this time it was on FIVE member nations. This was enough to force both EUR/USD and EUR/JPY to gap down over the weekend, but will these pairs continue to slide down today?

Euro pairs seemed to ignore the euro zone’s better than expected trade balance last Friday, as the report showed that the surplus widened from 0.5 billion EUR to 6.1 billion EUR in November. That was because traders focused more on the debt rating downgrades from S&P. France lost its pristine triple-A rating as their sovereign debt was brought down to AA+ with a negative outlook. Spain’s rating was downgraded to A while Italy’s was cut to BBB+ and Austria’s was slashed to AA+. Last but certainly not least, Portugal’s debt was downgraded to junk status. Ouch!

Although many were relieved to hear that Germany’s debt rating was unchanged, most market participants couldn’t help but worry about the impact of France’s debt downgrade. You see, France’s credit rating is tied with the EFSF’s, which means that the downgrade could affect the fund’s borrowing costs and this would make it more difficult for the debt-ridden nations to pay up.

As for economic data, the action starts on Tuesday as the euro zone will release its CPI figures and overall ZEW economic sentiment. Germany is also set to release its ZEW economic sentiment reading then. Unless those reports come in significantly better than expected, traders could stay focused on the region’s debt situation, which appears to be getting worse.

On Thursday, euro zone is set to release its current account balance, which could also come in higher than expected like its trade balance. The ECB monthly bulletin is also due then while the German PPI is set for release on Friday.

With hardly any top-tier report on the euro zone’s schedule, any updates on the euro zone debt situation could have a huge impact on the euro’s movement. Stay on your toes!

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The euro started the week on a very quiet note as it simply moved sideways against other major currencies. EUR/USD traded within a across the board yesterday. It traded within a very tight 23-pip ranged while EUR/JPY bounced around a 42-pip box.

The absence of high profile economic reports was to blame for this. Euro zone’s economic calendar only had the German wholesale price index and U.S. banks were on holiday.

Today will probably be much different though two tier 1 events are scheduled to hapen at 10:00 am GMT later.

First is the German ZEW economic sentiment survey. The survey, which measures the economic outlook of Germany using a positive/negative scale, is predicted to print a -49.7 reading. Last month, the figure was -53.8.

Then there’s euro zone’s consumer price index. The market expects the CPI to show a 2.8% inflation rate, just like last month. Meanwhile, the core version is slated to reveal a 1.6% rate. Higher-than-forecast figures usually provide support for the euro.

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Make way for the currency hotshot! Despite continued onslaught of credit rating downgrades in the euro zone, the euro still managed to clobber its major counterparts yesterday. EUR/USD even tipped an intraday high at 1.2809 before it closed 67 pips higher than its open price, while EUR/GBP also staged a nice recovery with a 40-pip gain.

The economic reports released probably egged on the euro bulls yesterday, especially when the German ZEW economic sentiment report came in at -21.6 in January, a lot more optimistic than the expected -49.7 reading.

The good vibes didn’t end in Germany though. The euro zone’s own ZEW reading is at -32.5 this month, also a huge improvement from December’s -54.1 figure. Lastly, the region’s CPI printed at 2.7%, a bit cooler than its previous 2.8% price growth.

Still, it doesn’t bode well for the region that credit rating agencies are on to the euro zone member states. Talks of Greece defaulting by March and Hungary asking for bailout are more persistent than ever, and I think market players will need some kind of assurance fast that the euro zone officials are doing something to stem investor fears.

For today we only have the Italian trade balance report at 9:00 am GMT on tap. The country’s trade deficit is expected to shrink a bit in December, but a higher deficit just might weigh on the euro.

Also keep your eyes on any news about the euro zone member states, will ya? We never know when the next big market-moving report might hit!

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You gotta admire the euro’s resiliency! It’s been shrugging off the bad vibes of the debt crisis and has been climbing up the charts like cray-cray! It posted its third straight victory over the dollar yesterday as EUR/USD climbed about 130 pips to close at 1.2860. But now that the pair is facing the top of a falling trend line, will it finally turn down?

If you’ve been scratching your head at why the euro has been rising despite concerns and threats to the euro zone, then you aren’t alone! It’s hard to pinpoint exactly why the euro has been gaining ground, but one possible reason is that traders are covering their shorts because they’re anticipating a move from European officials.

Some say the ECB may take on more quantitative easing. Others say the IMF may bump up its lending capacity. And while all of these are unconfirmed rumors, it seems to be doing a pretty good job at keeping the euro from sliding.

Today, we have a couple of tier 2 reports on tap. The euro zone current account is due at 9:00 am GMT, and most expect the deficit of 7.5 billion EUR to turn into a surplus of 0.5 billion EUR. At the same time, the ECB monthly bulletin will be published. Since this report could provide us with new insight about the state of the economy, it’d be a good idea to give it a look.

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Well whadya know… the euro managed to post another winning day, all thanks to very successful bond auctions in Spain and France. This caused borrowing costs to fall, which gave the market a reason to be positive. EUR/USD ended the U.S. trading session at 1.2967, 107 pips higher from its opening price that day.

In addition to the auctions, the market also drew optimism from ECB President Mario Draghi’s speech. He said that there was significant progress in the fiscal front of Europe, even though there were downside risks. He noted that he thinks that the demand for 3-year loans that they would offer would be high.

The only “bad” news for the day was the weaker-than-expected current account balance. It came out with a 1.8 billion EUR deficit, opposite the 500 million EUR surplus initially predicted.

Not much on euro zone’s forex calendar today as only the German PPI is due. It is slated to print a 0.1% increase, just like the figure seen the previous month.

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The euro ended its 4-day winning streak last Friday as traders closed out for the weekend. EUR/USD ended the U.S. trading session 1.2934, 34 pips lower from the beginning of the day.

Then, earlier today, the pair once again opened with a gap down as news that creditors failed to reach an agreement on cutting Greece’s debt. It appears that the optimism we saw last week is starting to fade, and we’re seeing a return of risk aversion.

There are a bunch of medium-tier data scheduled for release on euro zone’s economic calendar this week. Tomorrow, starting at 8:00 am GMT, the region’s purchasing managers’ index are due. The market is expecting the overall index to show a 47.4 reading for manufacturing and a 49.1 reading on services.

On Wednesday, the German IFO business climate survey will be published. The forecast is a 107.7 figure, slightly higher than last month’s 107.2.

The last important report to watch out for will be released on 7:00 am GMT Thursday. The GFK consumer climate survey, which measures how optimistic or pessimistic consumers are with regard to the economy, is slated to show a 5.6 reading.

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Currahee! With risk appetite on its back, the euro marched up the charts like a member of the 506, posting new highs versus the dollar and the yen. After opening below 1.2900, EUR/USD rallied throughout the day, clearing the 1.3000 barrier to close at 1.3034, marking a 172-pip gain. Meanwhile, EUR/JPY rose 132 pips to finish at 100.33.

To be honest, I find the euro’s persistence somewhat surprising, as not much progress has been on Greece’s debt swap deals. Even though bondholders are willing to take massive haircuts on Greek debt, there is still a lot of details to be worked out. Time is running out and according to Fitch, if a deal isn’t made by March 20, then Greece will be forced to default!

So, even with the threat of a default, why has the euro been rallying?

One reason could be that the markets are still in short-covering mode. Euro shorts were recently at all-time highs, so it’s only natural to see some correction in the markets.

For today, we’ve got a slew of French, German, and euro zone manufacturing and services PMIS coming out starting 8:00 am GMT. Most of the PMIs are expected to come in below the line-in-the-sand 50.0 mark, which would signal slight contraction in those sectors.

In addition, industrial new orders figures are also due at 10:00 am GMT and are expected to show a 2.1% downtick in orders this past November.

If the reports come in better-than-expected, we may just see the euro soar to new highs.

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Higher and higher it goes! Though the euro lost 8 pips against the dollar, it put up big wins against the yen and the Swissy thanks to strong PMIs! EUR/JPY climbed 93 pips to finish at 101.26 just as EUR/CHF closed at 1.2091 to record a 14-pip gain. When will its rally end?

Amidst all the concern about the euro zone heading into another recession, yesterday’s PMIs came in surprisingly upbeat. Who would’ve thought, right?

Except for the French manufacturing PMI, all reports released yesterday managed to exceed expectations. As a whole, the euro zone’s services PMI improved from 48.8 to 50.0 (versus forecasts of 49.1), and the manufacturing PMI ticked up from 46.9 to 48.7 (versus forecasts of 47.4).

But can these figures keep the euro afloat? Hmm… Only time will tell! The euro zone is still in a heap of trouble, and as a matter of fact, just yesterday word got around that Greece might be downgraded to “selective default” by S&P! Ouch!

Anyway, up ahead we have more data coming in the form of the German IFO business climate report. Look for the index to improve from 107.2 to 107.6 at 9:00 am GMT. After that, catch ECB President Mario Draghi as he delivers a speech at 1:15 pm GMT on “Europe’s Economic Outlook: What steps are needed to restore growth and confidence across the Eurozone?”

Keep your eyes locked on EUR/USD today, fellas! The FOMC statement is also due later in the New York session, and that may dictate price action on the pair for days to come!

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EUR/USD popped up the charts yesterday as it broke above the 1.3000 and 1.3100 handles and reached a high of 1.3122. EUR/JPY also had its share of gains as it drew close to the 102.00 major psychological level. Can the euro hold on to its gains today?

One factor that boosted the euro up the charts was Germany’s better than expected Ifo business climate index. The reading climbed from 107.3 to 108.3 for this month, outpacing the consensus at 107.6. This shows that the economic assessment and outlook of businessmen improved in euro zone’s largest economy.

Another factor that propped the euro up against the safe-haven Greenback was the FOMC statement, which revealed that the Fed plans to keep rates low until late 2014. Two more years of low U.S. interest rates? Now that’s enough to trigger a massive dollar selloff!

As for today, only the GfK German consumer climate reading is due from the euro zone. The reading for the current month is expected to hold steady at 5.6 but, given the upbeat results of the business climate survey, consumers might also be a tad more optimistic about euro zone’s prospects this time. Keep an eye out for the actual report due 7:00 am GMT!

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Is the euro rally starting to fizzle? After popping higher during the start of the London session, EUR/USD quickly erased its gains and closed 10 pips down from its 1.3113 open price. EUR/JPY also chalked up a losing day as it slipped a couple of pips below the 101.50 handle.

Stronger than expected GfK German consumer climate data gave the euro a boost during the first few hours of the London session as the report printed a 5.9 reading for January, higher than the consensus at 5.6. Just like the better than expected German IFO business climate report released the other day, the consumer climate figure indicated that Germans are feeling more optimistic about their economy.

However, euro pairs quickly retreated from their highs when news broke out that the ECB still couldn’t reach a deal with Greece when it comes to their sovereign bonds. You see, the central bank is currently holding more than 400 billion EUR in Greek bonds in its balance sheet and is currently debating with Greek creditors over what to do with these bonds. Unless they reach an agreement soon, the euro might just keep sliding down.

As for economic data, euro zone is set to release money supply data along with private loans figures. However, these reports aren’t expected to have a huge impact on euro price action. What you should probably focus on is ECB head Mario Draghi’s speech at 1:15 pm GMT since he could shed more light on the next steps that the ECB plans to take when it comes to dealing with the ongoing debt problems in their region.

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We got mixed results from the euro last Friday. While it came out on top and earned 115 pips in its battle against the dollar, it marked its second straight loss against the yen and lost 12 pips. What can we expect from it today?

We didn’t really have any hard stats to work with last Friday, but nevertheless, traders had plenty to think about.

For one, EU Commissioner Rehn was spreading rumors that Greece and its creditors were close to finalizing a deal and that things would be ironed out by the weekend. Right now, we’re still waiting for solid confirmation that they’ve reached an agreement. Multiple sources say that a deal is definitely in the works, and many say it might be announced by today’s summit.

What summit, you ask? I’m talking about the EU summit today, of course! Many are expecting big announcements from the first summit of the year. Investors want to see what sort of safety mechanism EU leaders have in mind, but many believe they’ll be focusing on economic growth. I was talking to some of my homeboys and they said that they believe some funds may be used to generate jobs and finance small businesses.

Though the summit probably won’t focus on Greek debt issues in particular, it could serve as a prime venue for big announcements, so be sure to stay on your toes today, fellas!

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Was that a drive-by shooting we just witnessed? With risk aversion coming back in force, the euro got killed in yesterday’s trading action. EUR/USD dropped a solid 100 pips to finish at 1.3130, while EUR/JPY closed at 100.24, down 120 pips from its opening price.

So who was the culprit this time around? No other than our fabulous European leaders!

No progress was made at the EU summit, as European leaders failed to come up with solutions to handle Greece’s ongoing debt problems. It seems as if European leaders are content to wait until Greek officials succumb to market pressure and accept the harsh deals that private bondholders have currently put on the table.

With the lack of any new developments, the markets were largely disappointed, and this helped the euro tumbled across the charts.

There was one bit of good news yesterday though, as Italian bond auctions did relatively well. Italy was able to sell 7.5 billion EUR worth of bonds, which was near their maximum target. Lately, bond auctions have done relatively well, despite all the concerns about a potential Greek default and the effects of contagion. I suggest keeping tabs on the bond auctions, as a rise in yields or the lack of participation may be an early signal of more troubling times to come.

For today, we’ve got German retail sales and the German unemployment change reports coming out at 7:00 am GMT and 8:55 am GMT respectively. Retail sales growth for the past month is expected to print at 0.9%, while another 8,000 jobs are expected to have been added to the German economy last December. If these reports print much better-than-expected, it could give the euro the boost it needs to erase some of yesterday’s losses.

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Red was the color of the day yesterday as most economic reports released from all over the globe failed to meet expectations. Because of this, EUR/USD was hit hard by risk aversion and posted its second straight day of losses. The pair closed the U.S. trading session at 1.3080, 50 pips lower from its opening price that day.

In euro zone, the German retail sales report came in with a 1.4% decline, much worse than the 0.9% decrease initially expected. Meanwhile, the French consumer spending report showed a 0.7% fall, opposite the 0.3% increase forecast.

The only “good” news that was published from the region was the German unemployment change. It showed that the number of unemployed people fell by 34,000, much higher than the 8,000 figure consensus.

Today, the only major report that will be released from euro zone is the flash consumer price index estimate. The market is expecting a 2.7% rate year-on-year, which is slightly lower than the previous month’s 2.8%. The actual figure will print at 10:00 am GMT.

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[I]“Up, up, here we go, go[/I]!” With an abundance of risk appetite to fuel its jet packs, the euro flew up the charts, gaining against the dollar and the yen. EUR/USD closed at 1.3152, up 72 pips from its opening price, while EUR/JPY finished at 100.25, posting a 52 pip gain on the day.

The only piece of “hard” data that was released yesterday was CPI flash estimate. As expected, the figure printed at 2.7% year-on-year, which is near the high end of the ECB’s target. Still, this release didn’t have too much of an effect on euro trading.

So what caused the euro’s swagger yesterday?

First, we saw better-than-expected Chinese PMI manufacturing figures, as it printed at 50.5 (expectations were at 49.6). This means that instead of shrinking slightly, Chinese manufacturing industries are expected to grow a little bit in the near future. This boosted risk-taking in the markets, as it lessens the chance of an economic slowdown this year.

Second, European bond auctions went fairly well yesterday, as Italian, Spanish, and Portuguese yields all dropped. Portugal was able to sell 1.5 billion EUR worth of bonds, with 3 month bill yields coming in at 4.068% (down from 4.346% in the previous auction), while 10-year bond yields printed at 14%, which was way below the 16.58% high.

Thirdly, it seems that we’re actually seeing some optimism out of the Greek debt deal talks, as Greek Finance Minister Venizelos is just “one step away” from working out a deal with private bondholders. Well, the truth is, they are running out of time, so any sign of progress would probably be taken as a positive!

Adding these all together, and it was a rather good day to be a euro bull. Congrats to those of you who bagged some pips. To those of you who were less foruntate… there’s always today!

No hard data lined up today, but as we saw yesterday, its all about risk sentiment baby! Keep an eye out for any developments regarding the Greek debt situation, as well as signs of life from the equity markets. If we continue to hear more good news, it may be time to hop on that long euro bandwagon!

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Despite it being already the month of love, the euro didn’t get any lovin’ from traders in yesterday’s trading. EUR/USD failed to trade past the 1.3200 handle and dropped to an intraday low of 1.3085. The shared currency was able to pare some of its losses during the New York session but it still fell short of a win by 7 pips, closing at 1.3145.

The lack of any significant new developments in the euro zone and the absence of economic data might have turned off investors from buying the euro yesterday.

Greece is still negotiating with its private creditors for a debt deal. Meanwhile, German Chancellor Angela Merkel tried to convince China yesterday to invest in the EFSF, saying that the country (as well as everyone else) will want the debt crisis to be solved. Chinese Premier Wen Jiabao seems open to the idea but we’ll have to wait and see if China does in fact keep its promise.

As for economic data, we only had the PPI report for December which showed that producer prices declined by 0.2% in the region. But don’t fret! Perhaps the reports we have today will be able to boost the euro. (That is, if they come in better-than-expected.)

At 9:00 am GMT, the euro zone final services PMI for January will be released and it is expected to match its previous reading at 50.5. Then at 10:00 am GMT, the retail sales report for December will be on tap. Consumer spending is seen to have increased during the month by 0.4%.

Other than that, be sure you also keep tabs on the much-anticipated NFP report from the U.S. as it would most probably affect the price action on EUR/USD. Check out Forex Gump’s article to better anticipate the report. Good luck!

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With risk appetite dominating the markets, who needs to watch the Super Bowl to see some action? Okay, maybe it’s not as exciting as watching The Big Game, but the euro managed to lock in some pips thanks to a positive jobs report in the U.S. EUR/USD traded on a 100-pip range before ending the day at its open price, but EUR/JPY rose by 47 pips to 100.34.

Aside from rescheduling a couple of Greece-related meetings to later this week instead of Monday, the euro zone also provided mixed reports last Friday. The region’s final services PMI slipped a bit to 50.4 from its 50.5 reading, while its retail sales fell by another 0.4% in December.

Of course, the kicker in the euro’s strength was the positive NFP report released from the U.S. Don’t believe me? Read all about it in my USD write up!

Let’s see if the euro can get any support from this week’s economic reports. The week will start off with the Sentix investor confidence report at 9:30 am GMT and Germany factory orders data at 11:00 am GMT, but it will be followed by other big reports like the German industrial production report tomorrow at 11:00 am GMT; the ECB interest rate decision on Thursday at 12:45 pm GMT, and the ECB press conference at 1:00 pm GMT.

Good luck in your trading this week!

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Boy, does the euro know how to stage a comeback! The currency traded lower for the most part of the day with EUR/USD tumbling to its intraday low of 1.3028 after opening at 1.3120. However, the euro started to rally during the New York session and closed the day with an 11-pip gain at 1.3131.

Greece still hasn’t come into terms with its creditors regarding a debt deal and I have a good feeling that this weighed heavily on the euro yesterday. But with the currency still trading near its highs implies that investors have high hopes that officials will come up with a last minute agreement. Of course, it may have also helped the currency that the reports released from the euro zone yesterday came in better than expected.

The Sentix Investor Confidence index fore February came in at -11.1, a more modest decline than the -14.8 reading that markets were eyeing. Germany’s factory orders for December also topped expectations for a 0.7% uptick when it printed at 1.7% and erased part of its 4.9% decline in November.

With that said, you may want to keep tabs on the German industrial production report due later today at 11:00 am GMT. It is expected that the value of output produced by the industrial sector contracted by 0.1% in December 2011. A figure better than the forecast may give the euro its much-needed support to stay above 1.3000, at least for today’s trading.

Also be sure to keep an ear out for updates regarding Greece. From what I’ve heard, it seems like a few market junkies are expecting the government to announce a default soon. Yikes!