Daily Economic Commentary: Euro zone

Trading Discussion News and Economy
285

The euro continued to bully and ka-pow! pips from its counterparts in yesterday’s trading as good ol’ risk appetite backed it up. EURUSD traded past the 1.3200 handle after opening at 1.3171. It reached a new three-month high at 1.3263 before it closed the day at 1.3233. Boo yeah!

Yesterday we saw euro zone producer prices for June disappoint the market’s 0.4% consensus by printing at 0.3%. But inflation schmelation! The 0.1% differential didn’t weigh down the euro as traders seem to be more concerned about the region’s recovery over its inflation. It also helped that yesterday’s US reports made the euro more pip-worthy compared to the dollar.

But has the euro zone really been making progress? You betcha it has! Word in the market is that Greece is making a lot of progress in taming its budget deficit. In fact, it has impressed the EU and IMF so much, they’re gonna be all moms and pops and show off Greece’s improvements in a press conference sometime between today and Friday! Aww, ain’t that sweet?

So other than that, we also have PMIs from Italy, France, Germany and the entire region on tap today at 7:40 am GMT. But the ones you really have to watch out for is Euro zone’s composite and services PMI for June. Both are expected to reflect steady economic growth in the region, maintaining their previous readings at 56.7 and 56.0 respectively.

Lastly, euro zone retail sales data will be released at 9:00 am GMT, which the market doesn’t expect much from. The consensus for June is down at 0% from May’s 0.1% reading.

Aack. It seems like analysts aren’t expecting much from these reports but if the figures come out better than expected, we may just see the euro continue its rally up the charts!

286

Chalk one up in the loss column for the euro! EURUSD failed to make any significant moves from its opening price, and ended the day 67 pips lower for the day.

So what caused the euro’s demise yesterday? Wasn’t it running on all cylinders the previous two days?

You could probably point to mixed economic data as one reason why the euro didn’t find any fuel to keep on chugging along. The French, German and euro zone all came in slightly disappointing, with the euro zone version printing a reading of 55.8. This failed to keep pace with June’s figure of 56.0, which was also the expectation for this month’s score.

Retail sales did tick up, growing by 0.4% last month, after it was expected to rise by just 0.1%. Still, this failed to be the fuel that euro bulls could burn to push higher.

Personally, I think that the euro weakness was probably due to some profit taking, some dollar strength and most likely some position making ahead of key events coming up today and tomorrow. What do I speak of my young padawan? Why of course, interest rate decisions!

Tsk tsk, have you not bookmarked the BabyPips.com calendar yet? Do it now! It’s the coolest thing since Big Pippin’s fro!

Anyway, be on the lookout today, as the ECB will be releasing its interest rate decision today at 11:45 am GMT. Now, I don’t expect we’ll see any changes in the rate hike, but like other traders, you should be watching ECB President Jean Claude Trichet’s lips. No, I don’t want you to notice whether he uses chapstick or not – I’m telling you that you should listen to what he has to say! The euro has been on steroids lately, rising more than 1000 pips since its lows just a couple months ago! Seeing as how the euro zone has been killin’ it (in a good way) the past two months, we may just see Trichet smile and say good things.

Before I forget, German factory orders data will be available at 10:00 am GMT. Factory orders are expected to have increased by 1.5% in June, which would be a nice improvement over the 0.5% decline in May. With this being released right before the interest rate decision and during the euro zone lunch break though, I’m not too whether this will cause too much of a ruckus in the markets.

287

When did Mr. EURUSD become a fan of roller coasters? After opening the Asian session at 1.3164, EURUSD navigated the charts like it was on steroids, hitting an intraday low of 1.3117 before soaring up to 1.3230. At the end of the day, however, EURUSD settled at 1.3190, a mere 26 pip gain.

As widely expected, the European Central Bank announced that it chose to hold rates at 1.00% again yesterday. President Jean-Claude Trichet stuck to his good ol’ “rates are appropriate” speech and said that although optimism and Greece’s debt situation has improved, the outlook for the entire euro zone still remains uncertain. For now, the ECB chose to sit on their hands and wait for more positive data before deciding a move.

The only high-profile event scheduled for euro zone today is the release of the German industrial production report for June. Set to come out at 10:00 am GMT, it is slated to show a 0.8% increase, lower than the 2.6% gain seen in May. Better-than-expected results could take EURUSD back above the 1.3200 handle.

It could be tough today as the US non-farm payrolls will come out during the US session. Liquidity usually dies down prior the release, so price action during both the Asian and European sessions could be subdued with a burst or two of volatility. In any case, do be careful!

288

The euro kicked butt like Angelina Jolie in Salt as it ka-powed pips out of its counterparts during Friday’s trading. EURUSD started the day at 1.3186 and consolidated below the 1.3200 handle all throughout the Asian session. It wasn’t until the New York market opened that the euro bulls gained the upper hand against the bears and launched the shared currency to its new three-month high at 1.3334. The euro then bid its hasta la vista against the dollar with a 103-pip gain. Boo yeah!

Last Friday was more action-packed than usual because of the NFP report from the US. As you probably know by now, the figures came out so much lower than expected. This should’ve been good news for the dollar as risk aversion would keep higher-yielding currencies to advance up the charts. But that didn’t happen. So does this mean that we’re seeing the market return to old school fundamentals?

Hmm, I think it’s still too early to tell as the economic reports from Europe don’t exactly support this assumption. Germany’s industrial production fell short of the 0.8% growth forecast when it declined by 0.6% in June. Italy and Netherlands also followed suit, printing lower-than-expected figures, which could imply that industrial activity in the region might be cooling. Following its 0.6% decline in June, the Dutch industrial production index was at -1.2% in July. On the other hand, the one for Italy was 0.1% lower than the forecast at 0.6%.

Let’s see if today’s reports can prove our theory that it is fundies driving price action now. At 6:00 am GMT, we’ll hear about Germany’s trade balance. It is expected that exports exceeded imports by 12 billion EUR in June, beating May’s 9.7 billion EUR figure. The country’s current account will also be announced with its consensus up at 13.8 billion EUR from the previous month’s reading of 2.2 billion EUR.

We’ll also get a glimpse of investor lovin’ for the euro with the Sentix Investor Confidence index at 8:30 am GMT. It is anticipated to reveal optimism for August with the consensus at 2.1, up from July’s -1.3 reading.

If the actual figures come out better than expected and the euro rallies, then we would be a step closer to proving that it is fundamentals dictating price action. So be on your toes!

289

“It’s a wrap!” said the markets yesterday after they closed their long EURUSD positions ahead of the FOMC meeting later today. This sent EURUSD plunging by 68 pips from its open price at 1.3228. Good thing EURJPY reflected the region’s favorable trade data after it ended the day 20 pips below its open price at 113.60.

Yesterday a trade report revealed that German trade balance rocketed to 14.1 Billion EUR in June from May’s 9.8 Billion EUR. This is probably because exports increased by 3.8%, while the record high imports data also suggested increasing demand.

The Sentix investor confidence data should’ve also helped the euro, since it showed a surprising 8.5 figure from June’s -1.3 reading.

So why did the euro lose against the dollar?

Apparently a lot of traders took their profits from the dollar sell-off last Friday in preparation for the big FOMC statement today. Everyone is at the edge of their seats to see if the Fed will ease their policies as expected. If the Fed’s tone on the US economy is not as grave as many estimated, the dollar could continue its rally against the euro.

Germany’s Final CPI and the wholesale price index will also take center stage in the euro zone today when both are released at 6:00 am GMT. The final CPI is expected to remain at last June’s 0.2% growth, while wholesale prices are estimated to grow by 0.3% after dropping by 0.2% in June.

Lastly, the French industrial production will be on tap at 6:45 am GMT. It is expected to decline by 0.1% after rising by 1.7% in May, but a better-than-expected figure might provide some support for the euro.

Be careful in your trading!

290

Is the euro rally losing its steam? After reaching a high of 1.3334 against the dollar early this week, the euro continued to level off its gains against its major counterparts. EURUSD closed at 1.3183 after reaching an intraday low of 1.3074, while EURJPY fell 107 pips from its open price at 112.53.

The dollar’s weakness after the big FOMC statement might have eased some of the euro’s losses yesterday, but traders would probably have a hard time ignoring the region’s weak economic data.

French industrial production dropped by 1.7% in June after printing a 1.9% growth last May. This represented the sharpest drop since March 2009, and signaled uneven recovery in the manufacturing sector.

Germany’s figures were also added to the mix when their final CPI showed a 0.3% growth from June’s 0.2% rise, but the wholesale prices dropped by 0.3% in July. Hmm, will these figures affect the region’s GDP report on Friday?

No report will be released today, but keep your eyes open for any action in markets that might affect the demand for the euro. With China’s economic figures affecting the comdolls and risk appetite today, we just might see some volatility!

291

Talk about crash and burn! Yesterday EURUSD peaked at its opening price of 1.3182 and just like thatsnap, the euro fell from the bulls’ limelight. The pair tumbled 311 pips and closed the day at 1.2871.

  Just when we thought we were seeing a return to old school fundamentals, risk aversion comes back in vogue! Dang! Word on the street is that the last time a sell off as strong as this happened was in January 5, 2009. If you’re wondering why investors dropped the euro like it’s hot, don’t worry coz [Pip Diddy](http://www.babypips.com/blogs/pipnoculars/) is here to give you the lowdown.

Yesterday the Bank of Ireland reported that its profits for the first half of the year fell by 60%, losing almost 1 billion EUR to bad loans. This coupled with the European Commission’s answer to the Irish government’s SOS for financial back up to save the Anglo Irish Bank, reminded investors that the euro zone’s debt problems are still not over.

Err, I guess the effects of the stress tests are gone and the euro’s honeymoon period with the bulls is over. The tests calmed investors when the results showed that Europe’s banking system is healthy enough. Talks about leniency had been ignored but now that two of the banks which passed the tests are in need of more capital, investors seem to have come to their senses. The question that everyone is asking now is, how many more financially-troubled European banks are out there that the stress tests didn’t tell us about?

    I think only time will tell my friends, only time will tell. We have some data on tap for the euro today but I doubt that they will be enough to reverse the currency’s course and send it back into the bull’s turf again.

    At 7:00 am GMT we’ll hear about Spain’s [inflation](http://www.babypips.com/forexpedia/Inflation). Analysts are expecting that the general level of prices in the country declined by 0.4% in July after rising by 0.2% in June. Then at 8:00am GMT, the [ECB](http://www.babypips.com/forexpedia/ECB) will release its monthly bulletin. Italy will also announce its inflation figures at the same time with its [CPI](http://www.babypips.com/forexpedia/CPI) reading anticipated to have remained at 0.4% in July. Lastly, we have the region’s industrial production report at 9:00 am GMT which is seen to have decreased to 0.6% in July from 1.0% figure in June.

    Make sure you gauge the market’s risk sentiment before you enter in your trades today. May the pips be with you!
292

Sheesh, not again! The euro recovered some its losses against the dollar in the early trading sessions, but the disappointing economic reports from the euro zone sent the euro bouncing down the charts. After rallying to an intraday high of 1.2933, EURUSD plunged back to close at 1.2827.

Yesterday the euro bears got all excited when the region’s industrial production printed a surprising 0.1% decline after analysts already pegged a 0.7% growth. The report suggested that production nay not be as healthy as the recent rallies suggested.

Too bad Italy’s trade balance report didn’t drive away the bears when it widened to 3.06 Billion EUR last June from 1.93 Billion EUR in May.

Will the region get lucky on a Friday the 13th? The region’s GDP figures are scheduled for release at 6:00 am GMT. Growth for the second quarter is expected at 1.3% from the first quarter’s 0.2% progress, but a better-than-expected number just might scare away the euro bears.

Also keep your eyes glued to the tube for the US economic reports. The retail sales, CPI, and consumer sentiment data might give us clues on how the biggest economy in the world is doing, and will most likely affect the tone of risk appetite in markets.

293

Nice try, ‘ol pal! The euro continued to slide against its major counterparts last Friday after reaching intraday highs from the euro zone’s positive economic reports. EURUSD ended the week at 1.2753, its lowest in 3 weeks, after an intraday high of 1.2907. Meanwhile, EURJPY closed 13 pips lower than its open price at 110.05 after climbing to an intraday high of 111.12.

The euro bulls got all charged up when Germany’s quarterly GDP printed at 2.2%, its fastest pace in 20 years. The French GDP also gave the euro a lift when it showed a better-than-expected growth of 0.6% from the first quarter’s 0.2% figure. Meanwhile, growth of the whole euro zone was seen at 1.0%, which was way better than the first quarter’s 0.2% growth. The euro looks primed for a happy ending, right?

So why did the euro fall?

Word on the Wall Street is that investors didn’t feel the “All for one and one for all” vibe from Germany’s GDP as it highlighted the gap of Germany’s development against the other euro nations.

Others were also saying that the selloff was because of SNB Vice President Thomas Jordan’s comments about unloading some of their euro holdings they accumulated during their currency interventions.

Whatever the case, investors will continue to watch the region’s economic reports this week to confirm their positions, even when minor reports are only scheduled for release this week.

The euro zone will kick the week off with a CPI report at 9:00 am GMT. The figure for July is expected to maintain the 1.7% figure of June, while core CPI is estimated at 1.0% from June’s 0.9%. The ECB is expected to maintain their interest rates for a while, but better-than-expected figures might suggest improving demand from the economies. Don’t you start the trading week by missing the headlines!

294

Yeah boy! It was a good start to the week for the euro, as it took advantage of the dollar bulls’ absence from the markets. Just in case you weren’t keeping count, the euro actually failed to post any gains last week! EURUSD rose 67 pips from its opening price to end the day at 1.2825.

No major data was released from the euro zone yesterday, as only CPI figures were released. While consumer prices fell by 0.3% last July, they did rise 1.7% on annualized basis. Take note though, that this was largely driven by rising energy costs – you take that sucker out and prices only rose by 1.0%, indicating that inflation still remains subdued.

The euro also got a boost from news that China was diversifying some of their dollar holdings into euro-denominated assets. The combination of bad news for the dollar and good news for the euro helped keep EURUSD afloat and above the 1.2800 handle.

One piece of news that stayed under the radar was news that Portuguese and Greek banks are having more trouble raising funds in the open markets, and have had to borrow more from the ECB. Last month, Portuguese and Greek banks borrowed 21% and 2.5% more from the central bank than in June. A cause for concern? I thought banks did well on those stress testsl! Hmmm… Let’s see how this plays out over the rest of the week.

Looking at today’s economic calendar, we’ve got some high impact reports that may either make or break the euro’s week.

At 9:00 am GMT, current account data will be released. The deficit is expected to shrink from a figure of 5.8 billion EUR to 3.7 billion EUR this month. A shrinking of the deficit would indicate that more goods are being exported, which is good for the euro zone.

Later on at 10:00 am GMT, both the German and euro zone ZEW economic sentiment reports are on deck. The reports are expected to print readings of 20.9 and 10.6 respectively, which are both slightly lower than the previous month’s postings. If the results come in significantly worse than expected, it could spell doom for the euro.

295

For the second consecutive day, the euro kept its head above water and posted gains versus the dollar. EURUSD closed 60 pips higher, to finish at 1.2883. Meanwhile, the euro also stopped the bleeding versus the franc, as yesterday marked the first time in 6 days that EURCHF rose.

What helped the euro’s rise yesterday? Well, in this old man’s humble opinion, it certainly didn’t have anything to do with the ZEW reports released yesterday! We got some mixed results, as the German version of the report came in much weaker than expected, printing a reading of 14.0. Expectations were for a score of 20. Then again, I suppose this shouldn’t have been too much of a surprise – after all, the report has failed to hit consensus FOUR months in a row now! This indicates that analysts are becoming more concerned with outlook of German economy.

On the other hand, the euro zone wide ZEW report suggested that analysts are overall more optimistic for the euro zone. The report came in at 15.8, beating forecast of 9.3. Hmmmm… pretty interesting if you ask me. Why would analysts be more optimistic about the whole euro zone even when they are pessimistic about the future of its star player’s (Germany) economy?

The euro zone received more mixed results when current account data was released. The current account showed a deficit of 4.6 billion EUR, which was a little worse than the expected 3.8 billion EUR figure, but a nice improvement from last June’s 7.4 billion EUR deficit. The reason for the decrease was because of a rise in exports by 1.4%.

Looking ahead, it looks like we’ve got nothing on deck on from the euro zone. Can the euro resume its slow crawl up the charts?

296

Zzzzzz. With all the forex action yesterday, it would’ve been more exciting if traders just hit the beaches to catch the last of the summer sun. The lack of economic reports limited the euro’s price action, with EURUSD closing only 20 pips lower than its open price at 1.2860, while EURJPY leveled off to a 109.92 closing price after hitting an intraday low of 109.59.

The successful Irish bond auctions last Tuesday continued to give support to the euro in the early trading sessions yesterday, but lingering concerns over the global economic recovery pared the euro’s gains in the late sessions.

Will the euro have another go at gaining some pips today? Only the monthly German PPI is on tap today at 6:00 am GMT. Analysts project the producer prices to grow by 0.2% after June’s 0.6% growth, but a weaker-than-expected number can signal weakening inflationary pressures and might support the claims that Germany’s surging exports have little effect on local consumer demand.

297

The euro went on quite a strong rally during the London session, but the party came to an end when risk aversion reared its ugly head at the start of the New York session. From hitting an intraday high of 1.2904, EURUSD slipped and closed at 1.2819 to record a 41-pip fall for the day.

The euro’s early rally was spurred by German PPI data which more than doubled forecasts. Leave it to Germany to show Europe how it’s done! Producer prices rose 0.5% in July following the 0.6% increase in June. This report is often used as a leading indicator of future inflation since manufacturers usually pass on additional costs to consumers. Hmm… If Germany keeps this up, will we see the ECB resume its exit strategy?

Unfortunately, the euro’s climb was cut short when the US triggered a round of risk aversion with its worse-than-expected economic data. Boo! What a party pooper!

Take a look at your economic calendar and you’ll see that neither the euro zone nor the US is scheduled to publish any hard-hitting reports today. It looks like you’ll have to keep tabs on risk sentiment if you want to know where EURUSD is headed today. Good luck out there!

298

The euro must have been listening to Ester Dean and Chris Brown judging by the way it “dropped it low” last Friday. EURUSD capped the day off at 1.2709, recording a 110-pip slide and a new monthly low to boot.

The economic calendar was empty for both the euro zone and the US. So what could have caused the slide in EURUSD?

It seems like ECB official Weber acted as a partner-in-crime to risk aversion to send the euro to the dumpster. Last Friday, he reminded investors that the euro zone isn’t out of the woods yet by saying it would be best to keep stimulus plans in place. A hint of concern in Weber’s voice triggered a euro sell-off as doubts were raised in investors’ minds about the region’s economic health.

This week is make-or-break for the euro zone as it’s set to release a bunch of high-hitting reports. Will it reassure investors of its economic recovery? Or will it simply stoke fears of another economic downturn?

Starting the week off is a set of PMI data hitting stands today.

At 7:00 am GMT, France will be unveiling its August manufacturing and services PMI reports. Likewise, Germany will be publishing its own versions at 7:30 am GMT. Finally, at 8:00 am GMT, the PMI reports for both the manufacturing and services sectors of the euro zone as a whole will be issued. Though all the results for the month of August are projected to print slightly lower than July, all the readings are expected to indicate expansion in the manufacturing and services industries by staying above 50.0.

Then at 8:00 am GMT on Wednesday, Germany hits the spotlight again when it publishes its IFO business climate index. The report, which is often used as a leading indicator of the country’s economic performance, is expected to downgrade its reading from 106.20 to 105.50 in August. Germany contributes about 25% of the euro zone’s GDP, so if August prints an upside surprise, expect the euro bulls to come charging in!

Last but not least is the German CPI report set to come out on Friday. Analysts believe inflation will remain at 0.3% in August. But if inflation clocks in much stronger than expected, it could give the ECB more reason to consider exit strategies, which is usually bullish for the euro.

299

Are most traders out to catch the last of the summer sun? The lack of volatility near the end of the summer turned the euro’s price action into a near-snoozer.

Of course, it didn’t help that the PMI data from the euro zone was as mixed as Rachel Ray’s salads. Lingering concerns over the region’s recovery closed EURUSD 41 pips lower than its open price at 1.2663, while EURJPY ended the day at 107.91.

Germany’s services PMI printed a better-than-expected 58.5 reading, while the region’s services data clocked in at 55.6 as analysts predicted. This might have soothed some traders if not for the less-than-awesome manufacturing data from both Germany and the euro zone.

Germany’s manufacturing PMI was seen at 58.2 after July’s 61.2 figure, while manufacturing sentiments in the euro zone dropped to 55.0 after analysts pegged the figure at 56.3. Hmm, is the slowdown in the US economy starting to weigh down the region’s production? If it is, then that’s a real sinker!

Maybe we’ll know more on the region’s production demand when the industrial orders for June is released at 9:00 am GMT. The figure is expected to increase by 1.6% after May’s 3.8% rise, but a lower number might support the weak manufacturing PMI.

The National Bank of Belgium will also release its business climate report at 1:00 pm GMT. Will the pessimism cool down to -6.1 from July’s -6.5 reading? Don’t miss this report!

300

Thar she blows! Action on EURUSD may have been muted with just an 11-pip gain for the day, but moves on EURJPY were simply explosive yesterday! Thanks to a bout of risk aversion and Japan’s hesitation to intervene and stop the yen’s gains, EURJPY tumbled from its opening price of 107.93 to forge a new nine-year low at its intraday low of 105.44. Yowza!

The euro would have probably fared much better if the markets had only reacted to domestic euro zone news. Germany’s final GDP figures for the second quarter of the year were unchanged as expected at 2.2%.

Industrial new orders brought good news as it printed a 2.5% increase in June, a full percentage point above expectations. To add icing on the cake, analysts decided to upgrade May’s uptick from 3.8% to 4.1%! It looks like manufacturers in the euro zone will be busy in the coming months with all those new orders, eh?

It seems like business sentiment is improving in the region, too. According to the Belgian NBB business sentiment report, August earned a reading of -5.1. This might not sound so impressive, but hey, it managed to exceed expectations of -6.1 and is a large improvement from the previous month’s reading of -6.5. Baby steps, kids!

Can the euro extend its gains against the USD today? Or will EURUSD follow the footsteps of EURJPY and nosedive?

Later at 8:00 am GMT, Germany is scheduled to release its German IFO business climate data, which is slated to downgrade its reading from 106.2 to 105.8 in August. Don’t be surprised to see the euro slide if business climate cools down and the report prints lower than expected. Then again, the euro could be headed for higher ground if the report prints an upside surprise!

301

You win some, you lose some! The euro emerged victorious in its battle against the yen yesterday. But versus the Greenback, it was forced to chalk up another loss. EURUSD started the day off with a big drop but gave a valiant effort to recover its losses during the Tokyo session. In the end, it was able to limit its losses to 23 pips and closed at 1.2650.

Euro bulls must have breathed a sigh of relief after seeing the German Ifo business climate report. The data came in much better than expected, printing at 106.7 and surpassing forecasts for a reading of 105.8. Things are definitely looking hot in Germany! This is the third consecutive month they’ve recorded a more upbeat business climate! Now if only the rest of the euro zone were faring as well.

We have another German report coming our way today at 6:00 am GMT as GfK is scheduled to publish its monthly consumer climate report. Analysts are predicting a reading of 4.0 after seeing last month’s 3.9. Will this release follow in the footsteps of yesterday’s business climate report and give euro buyers something to smile about by printing better-than-expected results? Tune in to find out!

Then at 8:00 am GMT, the ECB will publish its July M3 money supply figures. Don’t get fooled by its fancy name, this report just measures the change in the total amount of euros in circulation. Analysts say we’re likely to see a 0.3% year-on-year increase following the 0.2% uptick seen in June. As usual, be on the lookout for an upside surprise that can trigger a bull run!

302

The euro bobbed its head to the beat of risk sentiment yesterday, and finished the day with mixed results. EURUSD closed at 1.2728, after hitting a high at 1.2765. EURCHF on the other hand, dropped over 100 pips from its daily high at 1.3145, to finish the day at 1.3026.

The euro benefitted from a nice run of risk appetite to start the day, but once stocks started showing red across the ticker line, the currency began giving up some of its gains. Mixed results on the economic front didn’t help the euro sustain its bullish run either.

First, the bad news. July M3 money supply figures were a little disappointing, as we saw only a 0.2% year-on-year increase, after expectations were for a 0.3% increase. This means that the money supply did not increase as much as expected. This points out that lending conditions are still feeble. Remember, there are concerns of a double dip recession, so as much as possible, banks should provide easy access to funding in order to stimulate the economy.

Okay enough with the negativity! On a brighter note, the German GFK consumer sentiment report came in to beat consensus by printing a reading of 4.1, its highest score so far this year. Apparently, German consumer are becoming more confident thanks to improving labor and growth conditions.

Could we see more range like behaviour today? The only piece of data due from the euro zone today is the German preliminary CPI report, which will be released any time today. Consumer prices are expected to have risen by 0.2% in the past month. Still, I don’t expect this report to have too much of an effect on the markets, as I believe most traders will be gearing up for an expected increase in volatility once US GDP figures come out.

That’s all for now! Good luck trading today my Forex friends!

303

Is EURUSD gearing up for a comeback? Judging from that slow but steady rise since Wednesday last week, it sure looks like it! Oh, and check it out: The pair gapped up over the weekend, from Friday’s close of 1.2734 to a week open price of 1.2761.

The euro seemed to be off to a bad start last Friday as a couple of economic reports printed weaker than expected results. German import prices were reported to have fallen by 0.2% in July, against the consensus of a 0.1% uptick. Meanwhile, Germany’s CPI stayed flat in August, a couple of notches below the expected 0.2% increase. These reports kept the euro’s gains capped since they reflected that inflation was starting to tone down in euro zone’s largest economy. That doesn’t exactly support a rate hike in the near term, does it?

Still, the euro didn’t hesitate to rally when Fed head Ben Bernanke delivered his speech later that day. When Big Ben revealed that the central bank is ready to do whatever it takes to get the US economy up and about, the Greenback sold off like mango shakes on a hot summer day.

Will the euro be able to hold on to its gains this week? Brace yourselves for another round of economic releases starting on Tuesday, when euro zone prints its August CPI estimate and unemployment rate. Inflationary pressures are expected to tick down for the month, pushing the annual inflation rate from 1.7% down to 1.6% in August. Meanwhile, the jobless rate is expected to hold steady at 10.0%.

The excitement peaks on Thursday as the ECB announces its interest rate decision. Even though rates are widely expected to stay at 1.00%, all eyes and ears are on the accompanying rate statement by ECB President Jean-Claude Trichet. Upbeat comments could push the euro higher so stay tuned for that starting 11:45 am GMT Thursday.

Lastly, on Friday, the retail sales report is due. After staying flat in June, retail sales are projected to climb by 0.3% in July. If you want to catch an opportunity to grab pips from euro pairs then, watch out for that report at 9:00 am GMT. Good luck!

304

Whew! The euro sold off like lemonade on a hot summer day yesterday! Though confidence improved in the euro zone, risk aversion was still behind the EURUSD wheel, driving the pair lower and erasing its gains from last Friday. At the end of the day, EURUSD closed at 1.2665 to lock in a 96-pip loss.

Moods seem to be improving in the euro zone as proven by the sentiment reports released yesterday. Though industrial sentiment held steady at a reading of -4 in August, consumer sentiment improved from a reading of -14 to -11. Likewise, economic sentiment clocked in positively at 101.8, up from 101.3 the previous month. Economic confidence in the euro zone hasn’t hit such highs since March 2008!

Unfortunately, action on EURUSD is suggesting that investors are more concerned over the region’s future economic outlook rather than its current performance. Boo!

Today promises to be much more data-packed than yesterday. I know that’s how you nerds like it!

At 7:55 am GMT, Germany is scheduled to publish its unemployment change report. Analysts are expecting to see the number of unemployed workers fall by 20,000 in July, just as it did in June.

Then at 9:00 am GMT, we get bombarded with a set of data!

First off is the euro zone CPI flash estimate, which is slated to publish a 1.6% increase in prices in August following the 1.7% uptick in July.

Then we have the Italian preliminary CPI report, which is forecasted to reveal a 0.1% increase in August after last month printed a 0.9% decline in prices.

Lastly, we’ll finally get a peek at the euro zone’s July unemployment rate, which is expected to remain unchanged at 10.0%.

As usual, be on the lookout for any upside surprises. You wouldn’t want to be caught with your pants down when EURUSD finally rallies!