Daily Economic Commentary: Euro zone

Trading Discussion News and Economy
264

Well, well, well… Judging by its movements in yesterday’s trading session, it looks like the euro is showing signs of separating from its usual risk sentiment behavior. EURUSD gained 79 pips to close at 1.2621 after the US released disappointing ISM non-manufacturing PMI data.

In the past, poor economic results from the US would usually lead to bouts of risk aversion that would take its toll on the euro. However, yesterday’s price action saw different results. Instead of pressing down on the euro, the disheartening US report brought on a broad US Dollar sell off, thus boosting the euro up. Are we seeing a return to fundamentals? Only time will tell!

The euro also found further support from gains in the European equities market. Things are finally looking up in the EU!

Yesterday might have been quiet with no reports released from the euro zone, but today’s a different story! We’ve got a couple of good ones headed our way at 9:00 am GMT.

Let’s start things off with the finalized euro zone GDP data. Analysts believe the economy experienced a 0.2% expansion in Q1 of 2010, the same pace as that of Q4 of 2009. As the main measure of economic output, the actual GDP results could trigger a bull run if it comes in with an upside surprise.

The euro zone household consumption report is also due today and is expected to show a 0.1% decline in Q1 of 2010, maintaining the same rate of decrease as Q4 of 2010. Low figures are usually bearish for the euro since weak household consumption usually reflects low consumer confidence and a slump in economic growth.

Ending our day at 10:00 am GMT is the May German factory orders figure, which is slated to show a 0.3% increase in new purchase orders, down from the 2.8% growth shown from the previous month. Factory orders often signal future business activity for the manufacturing sector, so look for the euro to rally if the figure picks up.

265

There simply wasn’t enough honey for the bears to keep the euro from celebrating its seven-week high against the dollar. EURUSD opened at 1.2621 and slid down to what would be the end of the bear rally at 1.2553. Then the euro bulls came around, knocked down the dollar, and boosted the euro up to the day’s high at 1.2665.

  Investors seemed to be in their little-miss-sunshine moods because the euro didn’t look like it took a drag from Germany’s disappointing manufacturing report. The 0.5% decline in the country’s factory orders for May should’ve been a shocker to the bulls because it marked  the first decline in five months. On the brighter side of things, Europe’s final [GDP](http://www.babypips.com/forexpedia/GDP) stats for the first quarter hit the 0.2% target. 

  The euro was able to continue its parade in the bulls’ turf thanks to all the positive vibes. So what got them all giddy? 

  Stress tests. 

  Yeah, you read that right. See, those don’t just apply to overworked dudes like me. Our buddies in the [European Union](http://www.babypips.com/forexpedia/European_Monetary_Union) decided to give those stress tests to around 100 banks in Europe to see if they can still rock and roll despite the economic slowdown. And as the charts show, it seems like investors are all smiles about it! 

  But that was yesterday. See if the investors will still walk the euro zone sunshine with today’s reports.

At 3:30 pm GMT, we will hear how the region’s industrial production is doing. Don’t keep your hopes up though. The growth of the mining, manufacturing, and service sectors is expected to have slowed at an annualized figure of 9.3% for May from April’s 10.2% reading. After we get that out of the way, we’ll get the dish on Europe’s inflation with the CPI report. But things aren’t looking swell either as it is expected to print a 0.4% decline in May.

Last and certainly not the least, we have the ECB’s interest rate announcement at 7:45 pm GMT. Analysts aren’t expecting ECB President Jean-Claude Trichet to announce a hike until the stress test results are released on July 23, but keep your ears open as he may drop some hawkish hints that could boost the euro.

266

“It’s chow time!” said the euro bulls yesterday after the IMF, ECB, and US reports made up the triple sandwich that added a huge weight to the euro across the charts. The optimistic reports sent the currency to its two-month high against the dollar before eventually closing at 1.2698. The reports also pushed EURJPY 135 pips up from its open price of 112.18.

The IMF energized the bulls when they released their quarterly report that reflected improved global growth estimates. The estimated global economic growth for 2010 was raised to 4.6% from April’s 4.2% figure on counts of expansions in the emerging economies and positive monetary policy responses from the governments. Though the 2011 growth forecast remained steady at 4.3%, the improvement was a feast for the risk-hungry bulls.

ECB President Jean Claude Trichet joined the party when he gave his speech after the ECB retained their 1.00% interest rate. He pointed out that economic indicators are suggesting momentum in economic recovery, and that inflation expectations are firmly in place.

Trichet’s frequent references to the upcoming European bank stress tests was also taken as bullish, since it signaled that they are not expecting the banks to need additional help from the ECB.

The big cherry tomato on top of the high-pipcalorie sandwich was the stronger than expected US jobless claims report. Initial claimants dropped to 454,000 from last week’s 472,000, while continuing claimants were reduced to 4.41 million from last week’s 4.64 million. This suggested improving employment conditions in the US and further boosted risk appetite.

Will the economic data scheduled today end the week positively for the euro? The EU-harmonized consumer price index in Germany is scheduled at 6:00 am GMT. An annualized figure higher than the expected 0.8% would mean inflationary pressures are rising, which might be good for the ECB’s next interest rate decision.

The French and Italian industrial production will also be released today at 6:45 am GMT and 8:00 am GMT, respectively, and the monthly figures exceeding its 0.3% and 0.8% expectations would support Trichet’s statements on the region’s growth.

Speaking of the big man, he will be giving another speech in Frankfurt today at 6:00 am GMT. Will he announce more positive news for the euro? Keep your eyes glued to the tube!

267

Last Friday marked the end of the euro’s hat trick as it ended its three-day streak of wins against the Greenback. EURUSD entered the weekend weaker, closing at 1.2640, down 51 pips for the day.

It looks like European bankers were busy making preparations for the world cup finals! The euro slipped in spite of the positive economic data published last Friday.

Industrial production seems to be picking up in the euro zone. French industrial production was expected to show a 0.3% growth, but instead posted a 1.7% uptick in May, following the 0.5% decline in April.

Analysts also underestimated the Italian industrial production figure when they predicted a 0.8% increase. Actual results for the month of May showed a solid 1.0% uptick in the output produced by manufacturers, surpassing the 0.9% growth of the previous month.

On the other hand, Germany’s CPI figure came in as expected and revealed a 0.1% increase in prices in June, the same pace as that of May. Similarly, the EU-harmonized version didn’t cause any surprises when it printed a 0.8% rise, which also the same rate of increase as May.

This week, European bankers might find more reason to party! (No, it has nothing to do with Spain winning the world cup.)

The action begins tomorrow at 6:45 am GMT, when France is scheduled to publish its June CPI data. Most economists believe prices rose by 0.1% in June, just like in May. But expect to see the euro bulls come charging in if this report prints an upside surprise.

Also on Tuesday, the German ZEW economic sentiment report is set to be released. The index is anticipated to show a slight dip from a reading of 28.7 to 25.2 in July. Since the survey measures investors’ level of optimism, euro bears could be in for a field day if the report reveals an even bigger decline in sentiment.

Then when the clock strikes 9:00 am GMT on Wednesday, investors will finally get their hands on the latest euro zone CPI data. For the month of June, the report is slated to maintain the 1.4% year on year increase in prices seen in May. Since this figure is a direct measure of inflation, and higher inflation gives the central bank reason to hike rates, look for the euro to rally if results come in better than expected.

At the same time, the May euro zone industrial production report is due for distribution. Can the euro zone deliver the forecast of a 1.2% growth in output following the 0.8% increase in April? Or will worse-than-expected results send the euro diving? Stay tuned to find out!

268

nice summary. I agree with the Spain won the football might not impact to bull on EUR :slight_smile:

-Santacruz

269

Could it be that the euro bulls are tired of running the EURUSD race? Yesterday, the pair opened at 1.2641 and crawled to the day’s high at 1.2648. During the overlap of the Sydney and Tokyo sessions, the bears came pouncing in and pushed the pair below the 1.2600 handle. The bulls tried to regain composure, testing the psychological level a few times but they didn’t seem to have enough power left and just settled the pair at 1.2597.

Aside from all the “Viva España!” screams, the euro zone was pretty quiet yesterday. I hope that you aren’t too tired from all that celebratory parties because today will be a busy one with all the reports coming out. Ready? Here we go.

We’ll start at 6:00am GMT with the figures for Germany’s Wholesale Price index. It is anticipated to print lower at 0.2% in June from May’s 0.3% reading. Then you will have 45 minutes to eat some Cheerios and brush your teeth before the French CPI stats for June are released. The index is expected to print an annualized decline of 1.5% in June from 1.6% in May. INSEE will announce that along with the country’s HICP which is also eyed to have decreased at a rate of 1.8% in June from May’s 1.9% on a yearly basis. Next up is the Spanish CPI and HCIP at 7:00 am GMT which are projected to have remained steady at 0.2% in June.

All the reports I just enumerated are considered as inflation indicators. This could mean that better-than-expected numbers may just be the Gatorade that will power the euro bulls to another rally. But wait, we’re still not done yet.

At 9:00 am GMT, we’ll have the ZEW reporting on the euro zone’s economic sentiment. The index is anticipated to reveal a pinch of pessimism on the region’s economic outlook at 16.3 in July, which shows a decline from June’s 18.8 reading. Along with that announcement are the results of ZEW’s survey on Germany’s current economic conditions and economic sentiment. Economic conditions in the country are expected to have improved to -1.2 from June’s -7.9. However, the economic outlook is a bit gloomy with an anticipated decrease to 25.3 in July from June’s 28.7 reading.

If you’re planning to join in the euro bulls’ gang, you may want to keep your fingers and toes crossed that the figures overshoot the expectations. You tried crossing your toes didn’t you? Haha. I knew it! Anyhoo, we still have one more thing on tap and it’s the big kahuna of reports!

The spotlight will be focused on Greece as the central bank starts the bond auction today. It will gauge investor confidence for both the euro and Greece. Talk about pressure! If it turns out to be a success like Spain’s last one, we may just see the euro bulls get a dose of Red Bull to skyrocket the currency up the charts again. So tune in to that!

270

“ζητωκραυγάζω Ελλάδα!” might not be as catchy as “Viva España!”, but Greece also deserves a cheer after their better than expected bond auctions boosted the euro despite the region’s poor economic reports. EURUSD jumped 128 pips from its open price and closed at 1.2724, while EURJPY closed only 2 pips lower than its intraday high of 112.93.

Portugal took a slap in the hand from Moody’s when they downgraded the country’s bond ratings by two notches from AA2 to A1. Too bad the traders barely paid attention, since S&P and Fitch already did the same a few months ago.

The German and French price indices should’ve also been the euro bull’s bogeymen after the reports came out worse than expected. The sentiments on the region disappointed the estimates when Germany’s ZEW survey printed at 21.2 after June’s 28.7, while its euro zone counterpart was seen at 10.7 in July against the 18.8 figure in June.

But the Greek bonds auction saved the day yesterday after the auction netted a 4.65% yield and beat the previous 26-week bill auction that yielded 5.7%. A lower yield expresses more confidence in Greek bonds, as normally, traders demand higher yields in exchange for higher risks. The surprising demand for the bonds was taken as a positive sign, and waved a red cape to the euro bulls.

Today the euro zone’s CPI will be on tap at 9:00 am GMT. Will the region maintain May’s 1.4% increase? A lower figure might mean lower demand from consumers, or lower inflationary pressures for an interest rate hike.

The monthly industrial production in May will also be released at the same time today. The output is expected to pick up by 1.2% from April’s 0.6% uptick, but a higher figure might mean greater than expected industry demand.

271

Did you check out the action on EURUSD yesterday? The markets went gaga for the euro thanks to poor US retail sales and the Fed’s gloomy economic outlook for the US economy! After ranging for most of the day, EURUSD burst upwards from its opening price of 1.2715 to reach an intraday high of 1.2778.

There was little reaction to the set of euro zone reports published yesterday. Judging by price movement, the euro zone CPI results offered neither bulls nor bears much to get excited about. Economists were spot on with their predictions as prices rose 1.4% year on year in June, the same rate of increase as May.

Industrial production in June followed through with the 0.9% increase of May by posting a similar 0.9% surge in the output of manufacturers. Unfortunately, production in May still fell short of the 1.2% that analysts foresaw.

What really got EURUSD movin’ and groovin’ like Forex Gump to the tune of “Bad Romance” was the US releases. Following the horrible 1.1% drop in retail sales in May, the latest US retail sales report failed to meet expectations of a modest decline of 0.3% by printing a 0.5% decrease in retails sales in June. Making things worse was the Fed’s announcement that they will be lowering their estimates for US economic growth from a range of 3.2% to 3.7% to just 3.0% to 3.5%. It’s no wonder traders went on a euro-buying frenzy!

Will we see more of the same today? With no high-impact reports scheduled for release today, the euro might just ride its momentum and rise some more. It might even receive a big boost if the US PPI and unemployment claims reports due at 12:30 pm GMT come in disappointingly!

272

The euro skyrocketed up the charts yesterday and became the Michael Jackson of the forex market as currency traders proclaimed it King of Pips! EURUSD opened the day at 1.2737, dropped a bit, found minor support at 1.2720, before making its way to the top of the charts. It hit a fresh two-month high against the dollar at 1.2956 during the New York session and closed the day at 1.2943.

What had the bulls rockin’ with the euro all night?

My guess is that it could have been the “Viva España!” screams that resounded from the successful Spanish bond auction. The government held a 3 billion EUR 15-year bond sale yesterday and got a pretty solid demand. Even though it’s going to pay a higher interest rate of 5.116% compared to the 4.434% in April’s sale, investors think that Spaniards will be able to turn in enough moolah to pay its debt due at the end of the month. Boo yeah!

But it wasn’t just about Spain. I’ve noticed that price action now tends to move according to the fundamentals and not so much about risk sentiment anymore. Before, the euro would usually take a punch in the gut whenever bad US figures came out and the dollar would be the one in the pip-destal. Now, it’s the dollar suffering from the noise of disappointing US data! If I am right, I have a feeling that the ugly figures from recent economic reports have sent the “beat it!” signal to the bulls. Of course, that’s just my opinion.

Today we have euro zone’s trade balance report at 9:00am GMT which is expected to reveal that exports exceeded imports lesser in May at 0.8% compared to April’s 1.6%. If you’re planning to trade EURUSD you may also want to stay tuned to economic reports from the US and keep this question in mind, how long can the euro hold on to its King of Pips title?

273

Was the 1.3000 level the height of euro’s party? After tapping the psychological mark last Friday, EURUSD went back near its open price at 1.2926 while EURJPY ended the day 134 pips lower than its intraday high of 113.36.

Some say that the euro’s feel-good vibes last week got a bit too loud and that the bulls might soon retreat. After all, the region still isn’t immune to bad economic data.

Last Friday, the Italian trade balance report badly missed the expected 0.75 billion EUR figure when it printed a 1.96 billion EUR trade deficit. The euro zone’s trade balance also sent heads rolling when it reached a 3 billion EUR trade deficit after posting a 2.2 billion EUR surplus in the same month last year. These suggested that recovery in the region wasn’t as stellar as the price action suggested.

Maybe the reports this week can clear all the forex noise, starting with the current account reported today at 8:00 am GMT. The net capital outflow is expected to narrow down to 3 billion EUR from April’s 5.1 billion EUR figure, but a positive number indicating that more capital is coming in than going out of the region could provide support for the euro.

An influx of manufacturing and services data from France, Germany, and the whole euro zone will also be released on Thursday from 7:00 am GMT to 9:00 am GMT. While the expectations show modest declines, better than expected figures might mean confidence in the region’s recovery, and might stimulate consumer spending and investment.

The region will end the week with a bang when the ECB publishes the results of the bank stress test at 4:00 pm GMT on Friday. The report is highly anticipated since the 91 banks that underwent the test represent 65% of the whole banking sector.

The Committee of European Banking Supervisors is also scheduled to issue statements minutes after the reports are released. Hmm, is this because the line between passing and failing is still blurry? For weeks analysts have been missing their soap operas trying to speculate on the criteria for the test, and what will happen to the banks that have failed the test. Be sure to be around when all the drama reaches its climax on Friday!

274

Whoa! The euro was looking like Spiderman the way it climbed over mountains of bad news yesterday! From its opening price of 1.2906, EURUSD started a strong early rally to hit 1.2992 before finally settling at 1.2942.

Investors were beaming with hope yesterday. It seems like they’re quite confident that worries over the euro zone’s banking sector will ease when the results of the stress tests are released this Friday.

In fact, they were so blinded by their confidence, that they didn’t even mind the heap of bad news that came out.

First off, Hungary, which is a member of the European Union, and the IMF failed to reach an agreement over bailout-loans. To make matters worse, Moody’s decided to get moody and downgraded Ireland’s credit rating from Aa1 to Aa2. But that’s not all! (Hey, this is starting to sound like an infomercial!) A German bank, Hypo Real Estate Holdings, was rumored to have failed the bank stress tests. Yikes!

Wait, we’re not done with the bad news yet! The euro zone got received another slap in the face when the current account revealed a downside surprise. Short of expectations of a narrower deficit at 3.0 billion EUR, the month of May recorded a 5.8 billion EUR deficit following the 5.6 billion EUR deficit in April.

Let’s see if the euro bulls can continue their rampage today as the German PPI report is scheduled for release at 6:00 am GMT. Analysts took out their crystal balls and foresaw a 0.2% uptick in the prices of goods sold by manufacturers in June, after witnessing a 0.3% uptick in May. High PPI figures usually get the euro bulls riled up since it can lead to future inflationary pressures as manufacturers pass on added costs to consumers.

Will this extend the euro’s wins or will yesterday’s bad news finally catch up with the euro. Tune in to find out!

276

Oh, oh, oh, oh, oh, oh, oh… Uh oh-euro-oh my gosh! After opening at 1.29473 yesterday, EURUSD traded higher pop, pop, popping to its 10-week high of 1.3029. Then it started drop, drop, dropping to the intraday low of 1.2839 before closing at 1.2882.

The 0.6% increase in Germany’s producer price index for June may have been the dynamite that launched the euro on its bullish rally early on the day. According to Destatis, the price of goods sold by manufacturers in Germany was higher than the 0.2% consensus and May’s 0.3% reading.

However, the bears decided to kick into high gear which made yesterday the second time this month for EURUSD to trade past the 1.3000 handle and see its gains vanish.

What could have caused the euro’s drop?

Well, first was Hungary’s lower than expected debt auction. Hungary held a sale for 3-month treasury bills and fell short of its 45 billion HUF (Hungarian forint) target by selling only 35 billion HUF. Yeah, they missed their target by 10 billion HUF! Not only that, they also have to pay a higher interest rate of 5.47% compared to last week’s auction which was only at 5.28%! Euro isn’t Hungary’s currency but some analysts see its fiscal problems as a threat to the euro zone because it is a member of the European Union.

Investors may have also been reluctant to push EURUSD higher given that results of the EU stress test on banks is due this Friday. Many may have just settled with their profits fearing that European banks could be in deeper trouble than what the market thinks. Duhn, duhn, duhn, duhn!

We don’t have anything on tap for the euro today. However, you may want to tune in to Fed Reserve Chairman Ben Bernanke’s talk later as it may spur risk aversion that could once again send the euro screaming down the charts. If you really want to trade the euro, be very careful. Keep in mind that we’re only two days away from the stress test results!

277

3…2…1…BLAST-the-euro-rally-OFF!!! Judging from yesterday’s price action, markets are expecting the European banks to crash and burn the EU stress tests even before the results take flight tomorrow.

EURUSD fell 146 pips from its intraday high at 1.2754, while both EURJPY and EURCHF plummeted by 160 pips and closed at 111.12 and 1.3409 respectively.

With all the fog surrounding the EU stress tests, could you really blame the traders for buckling up ahead of Friday’s explosion? Rumors were scattered all over the forex grapevine, from “leaked” stress test results to insider information from national banks. In fact, I wouldn’t even be surprised if they throw in a UFO from China to the circus!

Of course, it didn’t help that US Fed Chairman Ben Bernanke ignited his own fireworks yesterday after he revealed their grim projections on the US economy. The possibility of prolonged growth problems in the US sent a fresh wave of risk aversion in markets and sharply cut the demand for the risky euro.

We might see more action today when the series of manufacturing and services PMI from France, Germany, and the whole region is released at 7:00 am to 8:00 am GMT.

The reports are already expected to disappoint June’s figures, but worse than expected numbers just might plunge the euro further into the pip-deeps. Stay alert for all the action!

278

Boom boom pow, baby! The euro’s back and booming! Yesterday’s price action saw renewed life in EURUSD as it zoomed up the charts. By the end of the US trading session, it had climbed 117 pips and perched at 1.2885.

What triggered the euro’s quick and strong ascent was the release of some highly positive flash PMI reports for the month of July. The manufacturing and services PMI figures for both Germany and the euro zone all marked significant improvements from their previous readings, going beyond all expectations in the process. It looks like the euro zone’s got a bit of kick left in it, eh?

But all of the euro’s gains yesterday may easily be erased as the ECB is set to publish the stress test results at 4:00 pm GMT. If the test’s outcome can somehow restore confidence in the euro zone by credibly showing a healthy banking system, we might see EURUSD finally break past the 1.3000 mark. Then again, it can just as easily find itself back down in the ditch if the results disappoint.

Oh! But before that, let’s not forget about the German Ifo business climate data due 8:00 am GMT! Analysts are expecting a 0.3 drop in the reading to record a 101.5 in July. Though this report will probably take the backseat to the stress test results, it may still be worth taking note of. After all, you could be in a bit of volatility if July prints a surprise.

Stay on your toes, my friends! It’s a make-or-break day for the euro!

279

Euro bulls grooved to the tune of Gloria Gaynor’s “I Will Survive” as they ended the week victorious! Well, at least against most of euro’s counterparts.

EURUSD consolidated around the 1.2900 handle during the Asian session but rallied to the day’s high of 1.2966 when the London markets opened. It then tumbled to the day’s low to 1.2793, but the euro bulls regained their composure and settled the pair at 1.2195.

Investors were probably afraid and pip-trified of trading the euro last Friday, not knowing what to expect from the stress test results and with mixed economic reports from the EU. Let’s do a recap shall we?

First there were the disappointing reports from France and Italy that might have done the euro more harm than good. According to INSEE, French consumer spending fell short of the 0.3% increase in consensus when it printed a decline of 1.4% in June. Italians didn’t give the euro a boost either as retail sales fell 0.3% during the same month when in it was expected to post a 0.2% growth following the previous month’s -0.5% reading.

However, the Germans’ little-miss-sunshine attitude in July may have calmed investors and send the euro on its early rally. The German Ifo Business Climate index printed at 106.2 and overshot both the consensus which was at 101.5 and the previous reading of 101.8 in July. This optimism may signify that Germany’s economy may be in a better condition than what the market expects. Whoohoo!

And then came the stress test results. Duhn, duhn, duhn, duhn. The volatility at the wake of the release may reflect that investors didn’t know how to interpret the results. According to the CEBS, only seven of the 91 banks that went under review got big fat F’s on their scorecard and that only a combined capital of 3.5 billion EUR needs to be raised in order to save them from debt. That moolah is actually well below the forecast which ranged from 30 to 90 billion EUR! Not bad eh? Um, I’m not really sure. There’s a lot of speculation in the market whether or not the test was reliable enough to start with. But it seemed like it was good enough for investors, at least on Friday.

We don’t have anything on tap for the euro today. But keep an ear out for news coming from the euro zone. I have a feeling the market isn’t over with the stress test yet. Good luck on your trades!

280

After the big waves caused by the EU stress tests last Friday, the euro floated near 1.3000 against the dollar yesterday. Too bad cautious trading prevented any sustained gains above the psychological mark. EURUSD ended the day at 1.2994 after opening at 1.2879.

No data was released from the region yesterday, so traders focused on the EU stress test results. Some say that the point of the exercise was to restore confidence, but others were concerned that the tests might have been too lenient on the banks.

In any case, the risk rally sustained by the stress test-friendly remarks given by European leaders like ECB President Trichet was enough to boost the euro across the charts.

Will the German consumer confidence report at 6:00 am GMT today help clear the fog on the region’s economic state, or will it add to the traders’ indecision? The index figure is expected to increase to 3.6 this month after the 3.5 figure last June, but a higher-than-expected number might provide additional support to the currency above the 1.3000 mark.

The annualized M3 money supply will also be released today at 8:00 am GMT. The currency in circulation and in banks is estimated to decrease by 0.1% after its 0.2% decline last May, but an upside surprise could imply more money for spending and investment. Tread (or trade) carefully!

281

Try and try until you succeed! Yesterday, EURUSD once again failed at the 1.3000 level which has held the pair prisoner since May 2010. But it looks like it’s getting closer to breaking out of its cage! The pair settled just above the resistance at 1.3003, after reaching an intraday high of 1.3047.

Early in the day, the euro received what seemed to be the key to its cage locks when the GfK consumer sentiment index showed that sentiment across Germany has improved substantially. The index printed a rise from 3.6 to 3.9 in its July reading.

Analysts are attributing the optimism to a healthier labor market and the German team’s strong performance in the World Cup. Who would’ve thought Thomas Müller’s goals could have such an impact!

But the euro gave up much of its gains during the New York trading session. A mini wave of risk aversion ensued after the June US CB consumer confidence report revealed that confidence fell to it’s lowest level since February.

Later today, you’ll get a glimpse at July German CPI data. If analysts are right about their predictions, the report will publish a 0.3% increase in prices following the 0.1% uptick last month. Better-than-expected results could send the euro flying and release EURUSD from its prison. Stay on your toes because the figures could be released at any time!

282

“Mayday, mayday! Abort 1.3000 mission!” The euro bulls failed to penetrate through the psychological handle for the fifth time this month as risk appetite retreated, and gave the bears the advantage in yesterday’s trading battlefield.

  EURUSD rallied to its intraday high at 1.3043 after opening at 1.3002. But the bears attacked the pair during the New York session and caused enough casualties to erase the euro’s gains. The common currency ended the day at 1.2991.

  What went wrong? Hmm, it may have been Germany’s disappointing [inflation](http://www.babypips.com/forexpedia/Inflation) data that messed up the euro bulls’ battle plan. According to the country’s [CPI](http://www.babypips.com/forexpedia/CPI) figures for July, which printed at 0.2%, inflation is barely present. Analysts were expecting the bulls to get some ammo from it with the consensus up at 0.3% from May’s 0.1% reading. 

  Good thing Spain was somehow able to shield the euro from the attacks when it reported that its retail sales grew by 0.9% in June. Unlike the prior data from Germany, it was able beat the market’s forecast which was a 1.4% decline. Whew! 

  With another day out on the trading battlefield, traders are asking, “Will the sixth time be the charm for the euro bulls to succeed on its 1.3000 mission?” 

  Hmm, I really don’t know but some analysts think so. They are once again looking at Germany to provide the bulls some back up with its employment data. Since business and consumer confidence in the country has significantly improved, they are expecting that the number of people who claimed for unemployment benefits declined to 20,000 in June and bring down the [unemployment rate](http://www.babypips.com/forexpedia/Unemployment_Rate) to 7.6% from May’s 7.7% reading. At 7:55 am GMT, we’ll see if Germany will finally be able to step up today.

  We also have Euro zone’s industrial, economic and consumer sentiment indices at 9:00 am GMT. Businessmen are expected to have been more optimistic in June than they were in May with the industrial index forecasted at -5 from -6 and economic index at 99.1 from 98. However, the consumers are not seen to have been any happier in June with the consensus being unchanged at -14 from May’s reading.
283

What a sad way to end a month of wins! Though it made great gains in July, the euro finished the month on a sour note as it tasted defeat against most of the other major currencies. EURUSD slipped 46 pips from its opening price last Friday to close at 1.3032.

German retail sales worked against the euro as results showed that consumers spent 0.9% less in June, following a strong 3.0% uptick in May.

On the other hand, CPI flash estimate figures were in line with expectations, posting a 1.7% year on year increase in prices. Likewise, the unemployment rate published no surprises when it remained unchanged at 10.0%.

But that’s all in the past now… It’s time to move forward! We’ve got a new week and month ahead of us!

The hard-hitting reports start to come out on Wednesday, with the release of the monthly euro zone retail sales data at 9:00 am GMT. Analysts are expecting to see a 0.1% drop in retail sales in June, following the 0.1% increase in May. If results come in worse than expected, it could mean that consumers are beginning to feel the side effects of the euro debt crisis. Uh-oh!

Then the action picks up at 11:45 am GMT on Thursday when the ECB takes the stage to make its interest rate decision. Soon after that, at 12:30 pm GMT, the ECB will follow up with a press conference.

Though it’s widely expected that the central bank will keep rates at 1.00%, you may still be in for a bit of volatility as the ECB tends to wrap its interest rate decisions in comments about future policy. If analysts are correct, euro bears may have the upper hand since a dovish stance is expected in light of the euro zone’s economic problems.

Rounding up the week at 10:00 am GMT on Friday is the German industrial production data. The June edition of the report is slated to print a 0.9% uptick in the output of manufacturers, mines and utilities following the 2.6% increase seen in May. Can the report provide the euro with additional support by publishing an upside surprise? Find out at 10:00 am GMT!

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“Let’s go euro, let’s go!” The bulls cheered for the shared currency as it continued its parade up the charts yesterday. EURUSD kick started the week at 1.3065 and traded higher to hit a new three-month high at 1.3196. The pair then ended the day at 1.3180 in favor of the euro.

Thanks to the market’s improved risk sentiment, the euro was able to keep itself above the 1.3000 handle. This was evident in the rally in European stocks yesterday that may have somehow calmed investors of their worries about austerity plans hurting the region’s economic growth. Whew! But it wasn’t just that. Good ol’ better-than-expected figures from the region also made the euro all the more apiptizing to investors.

The euro zone manufacturing PMI rose to 56.7 in July from June’s 65.5 reading. The increase came as a pleasant surprise to investors as the market wasn’t anticipating the region’s manufacturing sector to have expanded from June. Boo yeah! Reports point out that the increase was spurred by the optimism of purchasing managers in Germany as the country’s PMI printed at 61.2 and right along the market’s target. France also stepped up to the plate as its PMI also rose in July to 53.9 from its 53.7 reading in June.

However, this doesn’t mean that it’s all gonna be sunshine and smiles for the euro bulls. No sir! While Germany and France’s manufacturing sectors displayed growth, other Euro zone countries show signs that they may have a tougher road to recovery. Yesterday we saw that the Italian PMI fell short of the 54.8 consensus by printing at 54.4. Ouch!

Well, that was yesterday. Let’s see if today’s reports will still make investors crave for the euro.

We have the region’s producer price index at 9:00 am GMT. After printing at 0.3% in April, the market expects it to have increased to 0.4% in May. An increase may not equal to an interest hike announcement from ECB President Jean-Claude Trichet on Thursday, but it could give him another reason to be more optimistic about the region’s economic outlook.