Daily Economic Commentary: Euro zone

What the heck is happening on EUR/USD! For the fourth day in a row, the pair formed a spinning top-like candlestick on the daily chart, as it finished just a few pips below its opening price. Will we finally see a breakout to end the week?

The euro dropped late in the London session, as Spanish yields once again took the spotlight. Apparently, Spanish yields are slowly creeping back up to 7%, as European leaders will be meeting today to discuss the conditions for a Spanish bailout.

Yes, a bailout is coming, but of course, nothing comes that easy! There are some questions as to whether or not the moolah will flow directly to Spanish banks, or if it will still go the government. There’s also a question of whether senior bondholders will have to take losses on the debt that they are already holding.

In other news, the current account printed a surplus of 10.9 billion EUR, which was more than double than the expected 5.3 billion EUR figure.

For today, the only hard report headed our way is the German producer prince index report at 6:00 am GMT. Word on the street is that the producers paid 0.2% less for their raw materials last month.

However, I don’t expect market players to pay much attention to this report, as they’ll most likely be gearing themselves up for the Eurogroup meetings that will take place.

Will Spain be granted lax bailout terms or will Germany lay down the law? Woooo! What a way to end the week homies!

EUR/USD reached new yearly lows last Friday as a fresh wave of euro zone debt troubles rocked the markets. After closing above the 1.2150 level last week, the pair gapped down over the weekend. Is EUR/USD on its way to 1.2000?

Euro zone debt problems came back with a vengeance last Friday as Spanish bond yields spiked above the 7% threshold and reached 7.18%. This shows that investors are requiring hell of a lot more returns on holding Spanish debt in order to compensate for the additional risk of default. This also means that, later on, the Spanish government will have a tougher time paying back its creditors.

This terrible news overshadowed the announcement from the EU approving the Spanish bank bailout plan. With Spain’s largest city, Valencia, asking for financial assistance from the government, it’s becoming pretty clear that a nationwide bank bailout will not be enough to save Spain. So much for being too big to fail, huh?

This week, the euro zone is set to release its PMI numbers on Tuesday and these figures could have a huge impact on euro price action. Wednesday has the German Ifo business climate index on tap while Thursday has the German GfK consumer climate report due.

For today, only the medium-tier euro zone consumer confidence report is on the agenda but this isn’t likely to have a lasting impact on the euro pairs’ movement. With that, the downbeat sentiment surrounding the Spanish debt woes could keep weighing on the euro for the rest of day unless we see any positive developments. Stay tuned!

Looks like the euro finally caught a break! Sellers took a breather after dumping the euro sharply last Friday, leading EUR/USD to end the day 24 pips above its opening price at 1.2135. Could this be just a dead cat bounce?

It looked as though sellers would continue having their way with the pair as the euro gapped down over 40 pips to start the weekend. Heck, it even hit a fresh 2-year low!

Apparently, some report came out over the weekend saying that Catalonia, Spain’s second most populated region, may soon join Valencia in asking for financial aid from the government. This in turn stoked fears that Spain may need to ask for a SOVEREIGN bailout. Yikes!

With bond yields on the rise and stocks on the rise, Spain and Italy have decided to ban short selling of stocks for the meantime. Sure, they can stop markets from short selling equities, but they can’t stop markets from shorting the euro!

Today, we have a whole mess of reports coming our way. Beginning with the French reports at 7:00 am GMT, the euro zone will unload its monthly manufacturing and services PMIs. Germany will follow up with its own versions of the reports at 7:30, before we see the euro zone-wide edition at 8:00 am GMT.

Surprisingly enough, as a whole, the region is expected to see improvements in both sectors. The manufacturing PMI is expected to rise from 45.1 to 45.3 while the services PMI is anticipated to tick up from 47.1 to 47.3.

Do not miss these reports, fellas! They could determine sentiment for the euro today, especially if they print uniform results (i.e. all better than expected or all worse than expected).

Euro just hit a new low, low, low, low! A new 25-month low against the dollar, that is! Before closing the day with a 64-pip loss at 1.2071, EUR/USD tapped 1.2042, its lowest level in more than two years!

With troubles from the euro zone sprouting left and right, I guess it was no surprise to see the currency crumble in yesterday’s trading. Lemme tell you all about them!

For one, Spain had to pay higher yields for its 3-month bills. Last time, the government yields for short-term debt were only at 2.36%. In yesterday’s auction, however, borrowing costs were higher at 2.43%.

Moody’s also rained on the euro bulls parade when it downgraded the credit ratings of Germany, Holland, and Luxembourg from AAA to AAA-. Why? The renowned rating agency said that the three economies could get hit bad should Spain and/or Italy need bailouts.

Speaking of Spain, the country’s bond yields continued to haunt the euro. The borrowing cost for 10-year bonds rose to a new high of 7.63% as bets that it would soon need a full-scale bailout increased.

And it didn’t end there! On the economic front, most of the region’s services and manufacturing PMIs for June also fell short of expectations. The reports only fueled concerns for the euro zone even more as they reminded investors that economies are already lagging in the midst of rising debt woes.

Only the French and euro zone services PMI came in better than expected at 50.2 (versus the 47.7 consensus) and 47.6 (versus the 47.3 consensus), respectively.

Meanwhile, the French and German manufacturing PMIs undershot their respective forecasts (45.6 and 45.3) by 2.0 points, coming in at 43.6 and 43.3. Germany’s services PMI also disappointed the 50.1 consensus when it printed at 49.7.

The euro zone manufacturing PMI also fell short of expectations (forecast was up at 45.3) when it came in at 44.1.

Ay,ay, ay! I know it seems that we won’t hear any good news from the euro zone in a while, but don’t jump into that conclusion just yet. Who knows bond yields could ease off their highs and the German Ifo Business Climate report, due at 8:00 am GMT today, may just get the euro bulls hustlin’ if it tops expectations (the forecast is 104.8).

With that said, make sure you’re on your toes for updates from the euro zone, homies!

Will ya look at that? It seems there’s some life left in the euro after all! Even with the German IFO business climate report printing a downside surprise, the shared currency was able to post solid gains across the boards. EUR/USD undid Tuesday’s losses by climbing 85 pips to 1.2156, while EUR/JPY eased off its 12-year lows to finish 65 pips higher at 95.03. Let’s see if it can sustain these gains!

It looked as though traders would continue to dump the euro after Germany posted worse-than-expected IFO business climate results. The index came in at 103.3, which is 1.5 points lower than the figure markets were hoping to see. However, this didn’t have much of an impact on the euro… in fact, it was largely ignored, homies!

Instead, the markets were focused on comments from ECB member Nowotny, who says the region should consider granting the European Stability Mechanism (ESM) a banking license. From the looks of it, the markets took this positively. It’s nice to see policymakers looking at other options to contain and manage the European debt crisis!

Still, I can’t help but wonder if yesterday’s rally was just a dead cat bounce. I mean, think about it: Nowotny’s proposal hasn’t even been accepted yet, and it will likely take a while before such a banking license can be granted. Heck, the ESM hasn’t even been approved by Germany yet!

Meanwhile, Italy saw its sovereign debt rating downgraded from B+ to CCC+ by Egan Jones. This just goes to show that the euro zone still has a loooong way to go before it gets out of the woods.

For those who missed yesterday’s action - you’re in luck! We could have another action-packed day ahead of us as we’ve got a couple of noteworthy events on the calendar.

First up is the GfK German consumer climate report due at 6:00 am GMT. Look for it to tick up from 5.8 to 5.9.

Then at 9:30 am GMT, ECB President Mario Draghi will take center stage as he participates in a panel discussion with BOE Governor Mervyn King. Don’t miss this one, fellas! With two of Europe’s top dogs set to speak, we could get valuable insight as to where the European economy is headed!

Super Mario saves the day! Remarks from the ECB head honcho Mario Draghi sent the EUR up, up, and away in yesterday’s trading. By the day’s close, the shared currency had scored a 131-pip win against the dollar as it finished at 1.2287. Meanwhile, EUR/JPY was up 106 pips from its opening price of 95.03.

In a speech yesterday, the ECB President said that the central bank would do whatever it takes to ensure the survival of the euro. Consequently, his reassurance that the will ECB step in if it became necessary got investors giddy. Spanish bond yields dropped 20 basis points to 7.15% following the remarks which, mind you, didn’t cite any specific actions from the central bank yet.

If borrowing costs continue to go lower in today’s trading, we’ll probably see the euro chalk up more gains as lower bond yields would somehow ease concerns about a Spanish bailout. So make sure you keep tabs on the bond markets!

Also be on your toes for top-tier reports from the euro’s counterparts. Our forex calendar doesn’t have anything scheduled from the euro zone today, but we do have a couple of top tier reports from the U.S. that could affect market sentiment.

That’s all, folks! Happy trading!

After EUR/USD’s meteoric rise on Thursday, the pair found itself trading within a tight range for the majority of Friday. The pair consolidated the entire Asian and morning European trading sessions and then rose slightly during the U.S. session. EUR/USD closed the day at 1.2300, just 13 pips higher from its opening price that day.

EUR/USD lacked movement due to the absence of market-moving events. All major reports came in as expected with the German CPI printing a 0.4% figure and the Advance U.S. GDP showing a 1.5% growth rate.

This week will be much different though as we’ve got a lot of high profile economic events on deck. Today, watch out for the Spain’s GDP report. It’s expected to show that the country shrunk by 0.4% during the second quarter after I had contracted 0.3% the quarter before. If it comes in worse than expected, EUR/USD could start selling off again.

Then, on Thursday, the European Central Bank (ECB) will be announcing its decision on interest rates. Market participants will be all ears on what the ECB has to say after it slashed interest rates by 25 basis points and set the deposit rate at zero percent in its last meeting.

The U.S. non-farm employment change will also be released on Friday. It normally has a strong impact on price action, so be sure to prepare yourself for volatility. The market is expecting that the 101,000 net jobs were created in July, slightly higher than the previous month’s 80,000 increase.

Pretty slow start for the euro this week, as it didn’t shoot off to any new highs or lows versus the dollar and yen. Could we see more of the same ahead of this week’s ECB interest rate decision?

As expected, the Spanish economy shrank by 0.4% last quarter. This marks the third consecutive quarter that GDP growth has come in the red. This only provides fuel for those who believe that the Spanish government itself needs a bailout.

For today, we could be in for a bumpy ride as we’ve got a whole bunch of second-tier data headed our way.

At 6:00 am GMT, German retail sales growth figures are projected to show that sales rose by 0.6% last month. This would be a nice reversal from the 0.3% decline we saw the month before. Later on at 7:55 am GMT, German unemployment change figures are due and expectations are that 9,000 jobs were lost last month. If both these reports come in better than anticipated, it could give the euro a nice boost early in the London session.

Later at 9:00 am GMT, the CPI flash report will be made available. Word on the street is that inflation remains at 2.4%, which is well within the band that the ECB wants. However, if the report comes in to show that inflation is much lower, it could give the central bank some room to lower rates even further.

Bad data? Ha! That ain’t no problem for the euro. Well, at least not in yesterday’s trading. EUR/USD traded higher despite disappointing consumer spending reports from Germany and France. The pair finished 45 pips above its opening price at 1.2304 by the end of the New York session.

German retail sales for June contracted by 0.1% and disappointed the market’s forecast which was for a 0.6% growth. Meanwhile, French consumer spending only posted a 0.1% uptick for the month and fell short of the 0.2% consensus.

But don’t worry, it wasn’t all bad for the euro yesterday. On the bright side of things, Germany’s unemployment change report showed that the number of unemployed people in the country was only up at 7,000 for June, still 2,000 people fewer than the market’s forecast.

Meanwhile, the euro zone-wide CPI for July and unemployment rate for June came in just as expected at 2.4% and 11.2%, respectively.

Don’t get too excited about buying the euro just yet though! EUR/USD is still trading below 1.2300. If you ask me, we probably won’t see any significant moves on the pair until the ECB rate decision on Thursday.

But until then, it might be a good idea to keep tabs on the euro zone’s final manufacturing PMI if you plan on trading the euro. Due at 8:00 am GMT, there are no revisions expected from its previous reading of 44.1.

Why, Bernanke, whyyyyy? Thanks to a lack of action from the Fed, high-yielding currencies like the euro took hits against its counterparts. EUR/USD fell by 82 pips, while EUR/JPY also slipped by 21 pips. How will the Fed’s decision affect expectations for Mario Draghi?

Super Mario will be on the hot seat today at a press conference at 12:30 pm GMT following the ECB’s interest rate decision at 11:45 am GMT. Since the Fed turned out to be a party pooper for the high-yielding currencies, it will be up to Mario Draghi to fulfill investors’ expectations for market intervention from a central bank.

Analysts say that Draghi will most likely announce a Spanish and Italian bond-buying program by combining the ECB and ESM’s powers, but there are also those who believe that the ECB head honcho will do nothing more than indicate his willingness to support the euro at all costs. So which side are you on?

While waiting for Draghi’s stage time, you might want to check out the Spanish employment numbers coming up at 7:00 am GMT and Spain’s 10-year bond auction scheduled sometime today. The mixed Spanish and Italian manufacturing PMI numbers barely influenced price action yesterday, but I have a feeling that traders will pay more attention to today’s data!

Be careful out there today, homies! Good luck and good trading!

The euro saw another case of “loose lips, sink pips” in yesterday’s trading as ECB President Mario Draghi’s speech sent the currency trading lower against its major counterparts. EUR/USD spiked up ti 1.2404 only to drop back down and close the day 43 pips below its opening price.

Meanwhile, EUR/JPY finished the day with a 66-pip loss at 95.26.

The boldness that the ECB head honcho showcased in his speech last week got investors a tad too giddy and set their expectations high for the ECB rate decision. Many were anticipating the central bank to take on more aggressive actions, such as the re-activation of the SMP, after he promised to ensure the euro’s survival.

However, yesterday Draghi only called for politicians to be on their toes to use the EFSF/ESM in the bond markets should the situation become unstable. Basically, his remarks implied that if Spanish and/or Italian bond yields soared to unsustainable levels again anytime soon, the central bank will not intervene. Yikes!

So what’s next for the euro now that the much-awaited ECB rate decision is over?

Well, you should stay tuned to the NFP report from the U.S. as the high-caliber data would probably affect market sentiment. That will be released at 12:30 pm GMT.

However, if you don’t think you’re ready for the potentially strong volatility that could be brought about by the release, you can also trade the euro zone retail sales report due at 9:00 am GMT. Keep in mindt hat the forecast is for consumer spending to have grown by 0.1% in June.

After days of disappointing data and unimpressive central bank interest rate decisions, the euro was given some relief as the week came to a close. The shared currency rallied strongly last Friday as the non-farm payrolls shattered market expectations. EUR/USD, which began the day at 1.2180, closed the U.S. trading session 201 pips higher 1.2381.

The much-anticipated non-farm payrolls from the U.S. came in at 163,000, much higher than the 101,000 initially anticipated. The better-than-expected figured tempered global slowdown concerns and supported risk appetite.

Today, we’ll see the Sentix Investor Confidence survey. It will publish at 8:30 am GMT and is predicted to print a reading of -30.8. Last month, the reading was at -29.6.

On Tuesday, await Germany’s Factory Orders report. It’s expected to show a decline of 0.8%, opposite the 0.6% gain seen the previous month. Wednesday has Germany’s Industrial Production report. It’s also slated to show a decline, but at a much lower pace at 0.7%.

Will we see the euro continue to dominate this week or was Friday’s move a one-time thing? It’ll all depend on whether the data this week upsets or satisfies the market.

Consolidation is the name of the game as EUR/USD moved inside a 50-pip range, with support at 1.2350 and resistance at the 1.2400 handle, yesterday. EUR/JPY, on the other hand, crawled downwards and closed 25 pips down from its 97.20 open price.

Only the Sentix investor confidence index was released from the euro zone yesterday and the report came in slightly better than consensus. The reading fell for the fifth straight month in August as it slipped from -29.6 to -30.3, just a few points above the expected -30.8 reading.

There aren’t any top-tier reports due from the euro zone today but we do have a few medium-tier releases that could still have an impact on euro pairs’ price action. Italy is set to release its industrial production data at 8:00 am GMT and its preliminary GDP reading for the second quarter of 2012 at 9:00 am GMT. Then, at 10:00 am GMT, Germany will print its factory orders data which could show a 0.9% drop.

If you’re planning to trade the euro today, make sure you keep an eye out for these releases because worse than expected figures could force the euro to head south while stronger than expected results could trigger euro buying. Stay on your toes!

Bring out the smoothies boys and girls! Let’s join EUR/USD as it simply chills on the charts! For the second straight day, due to the absence of high profile economic reports, EUR/USD lacked direction. It simply traded sideways and paced back and forth between support at 1.2375 and resistance at 1.2443.

The German Factory orders report yesterday failed to meet forecast. It came in significantly worse than expected as it showed a 1.7% decline. The market’s prediction was only a decrease of 0.9%.

We’ll probably see more directionless price action from EUR/USD today as no major reports are scheduled to come out. There are some tier 2 reports like the trade balances and German industrial production, but these reports normally have a muted impact on price action.

Party’s over, fellas! The euro got the short end of the stick yesterday as the common currency pared back its gains across the board. EUR/USD fell by 39 pips, while EUR/GBP also suffered a 35-pip loss. What did Draghi do this time?

Don’t blame Draghi for this one! Germany was the party pooper yesterday when it released its less-than-stellar industrial production and exports data. Industrial production in the euro zone’s largest economy slid by 0.9% in June after rising by an upwardly revised rate of 1.7% in May. Even its exports showed weakness with only a 1.5% gain in June against May’s 4.2% uptick.

Of course, it also didn’t help that credit rating agency S&P lowered Greece’s credit rating outlook from stable to negative. And to think that its CCC rating is already eight levels below investment grade!

Eurogroup President Jean-Claude Juncker also contributed to the gloom when he suggested that a Greek exit is not desirable, but is still manageable. This is a divergence from the officials’ speeches only a couple of months ago denying the possibility of a Grexit.

The only reports scheduled for release today are the ECB’s monthly bulletin and Italy’s trade balance data. Watch the ECB report closely in case the officials feel like dropping another bomb on the forex markets!

Down she goes again! For the second day in a row, the euro was dumped as traders continued to worry about the region’s economy. While EUR/USD slipped 61 pips to 1.2298, EUR/JPY trickled down 30 pips to 96.66. Will the euro manage to pick itself up before the weekend?

The euro found no love yesterday as the ECB cut its growth forecasts for 2013 from 1.0% to just 0.6%. To make things worse, it also pointed out a few downside risks to the economy in its monthly bulletin. Hey, if the central bank itself thinks that the road ahead is about to get even rougher, then you know the region’s in trouble, right?

It seems that investors are starting to lose hope that the ECB will act to support the euro zone. And even those that still have faith in the central bank aren’t entirely sure if it CAN do anything at all.

Today, we only have a few minor reports from Germany and France on tap. Germany’s expected to publish its final CPI report, forecasted to print a 0.4% uptick in prices again. Meanwhile, France has industrial production data on deck, and it’s supposed to come in at 0.4%, up from -1.9%.

Now, I’ll be honest with you, homies. These probably won’t move the markets. That being the case, market sentiment will likely remain the key driver behind euro price action, which means the euro could come under selling pressure once more.

And the losing streak continues! With the euro zone only printing minor reports, investors had time to worry about the ECB’s capability to intervene in the markets. It dragged EUR/USD to an intraday low of 1.2241, while EUR/JPY suffered a 44-pip loss.

Last Friday we saw Germany’s CPI data come in at its expected rate of 0.4%, while France’s industrial production data missed its 0.4% expectations with a 0.0% growth.

But no second-tier data distracted the euro bears! Word on the hood is that investors are starting to worry that the ECB would have a more difficult time buying Spanish and Italian government bonds since the ESM is yet to be approved by Germany’s High Court.

Will the euro zone officials pull up more card tricks to ease investors’ concerns, or will risk aversion continue to dominate the euro’s price action?

Only Germany’s wholesale price index at 6:00 am GMT is scheduled for release today, so you might want to pay extra attention to speeches by other euro zone officials or reports from other major economies for price-moving news.

Good luck trading today, folks! Don’t forget your pre-market preparations!

Believe it or not, the euro gained ground against its major counterparts yesterday as EUR/USD closed at 1.2338 while EUR/JPY ended the day at 96.67. Did we see any positive developments from the euro zone that boosted the euro?

Not at all! Although Germany reported a slight uptick in its wholesale price index, this low-tier report doesn’t really make a huge impact on the euro’s movement. Since there were no other updates or reports released from the euro zone and since risk appetite wasn’t exactly strong yesterday, the euro’s rally could be attributed mostly to profit-taking.

With that, we might just be witnessing a temporary rally among the euro pairs and these gains might reverse pretty soon. Of course that depends on today’s set of releases, a bunch of which will be coming from euro zone’s largest economies.

Germany and France are set to release their GDP readings for Q2 2012, with Germany hoping to show a mere 0.2% expansion and France expected to print a 0.1% decline. Also due today are French CPI figures and preliminary non-farm payrolls, which are also expected to reflect a slowdown in inflation and hiring. The party starts at 5:30 am GMT, so make sure you’re prepped by then!

Later on, at 9:00 am GMT, Germany will release its ZEW economic sentiment figure for August. The report could show a slight improvement in sentiment, from -19.6 to -19.4, as euro zone prospects seemed to improve lately. However, a weaker than expected result would reveal that investors and analysts are still very pessimistic about the euro zone debt situation, which could result in a euro selloff.

Don’t forget that the U.S. is also set to print a bunch of top-tier data, namely its retail sales and PPI reports, during the U.S. session so check out my U.S. economic commentary if you plan to trade EUR/USD then!

Hot start but poor finish by the euro yesterday, which couldn’t sustain the momentum it gained during the Tokyo session. After hitting as high as 1.2387, EUR/USD tumbled during the latter sessions and finished at 1.2325, down 12 pips from its opening price.

The euro got a small boost early, as both the German and French Q2 GDP readings came in better than expected. French and German GDP growth printed at 0.0% and 0.3% respectively, as opposed to the -0.1% decline and 0.2% projected increase.

However, the good times didn’t roll during the latter part of the London session as the German ZEW index and industrial production reports disappointed like a Ben Affleck acting performance. The German Zew economic sentiment report came in at -25.5 after it was projected to show an improvement at -19.4.

Meanwhile, industrial production dropped by -0.6%, which marks a stark drop from the previous month’s upwardly revised 0.9% increase.

Nothing on tap today, but make sure you keep an eye out for reports from other countries. Based on yesterday’s price action, it seems that fundies are driving the market this week. So read up and be informed so you don’t get blindsided today!

Another day in the red? What’s new?! The euro lost ground against the Greenback and the Japanese yen as EUR/USD ended the day at 1.2286 while EUR/JPY closed at 96.90. Will the euro have a chance to bounce back today?

Even though the euro zone didn’t release any economic data yesterday, the euro was sold off heavily thanks to news reports showing that Greece might need an extension of their ongoing austerity program The report revealed that the debt-ridden nation might miss its deficit targets AGAIN and that they’d need more time to come up with the 11.5 billion EUR in spending cuts. Better keep your eyes and ears peeled for any updates since the Greek Prime Minister is scheduled to meet with Merkel, Hollande, and Juncker to discuss their options next week.

Another factor that probably triggered the euro’s selloff yesterday was the rumor that the SNB was already starting to diversify out of their euro holdings. After all, holding on to their EUR/CHF has proven to be expensive for the central bank and they might be thinking of accumulating reserves in other currencies instead. Although these are nothing more than rumors for now, stay on your toes in case the SNB confirms these plans!

The euro zone is set to release its CPI figures for July at 9:00 am GMT today. The headline figure is expected to show a 2.4% annualized increase while the core figure could post a 1.7% yearly rise. Don’t forget that the U.S. is also set to print a few high-profile reports, namely its building permits, housing starts, and Philly Fed index.

Take note that the U.S. dollar has been reacting to fundamentals lately, which means that weaker than expected U.S. data could trigger a dollar selloff and be positive for the euro… Unless the euro zone comes up with another set of bad news, that is!