Daily Economic Commentary: Euro zone

Trading Discussion News and Economy
305

The euro’s scorecard in yesterday’s trading was as mixed as the reviews for Grown-Ups. It was able to snatch a 7 pip win from the dollar as EURUSD retreated from its intraday high of 1.2744 and ended the day at 1.2672. Against the yen and the Swissy it got rotten Piptato grades losing 62 pips and 131 pips to its respective counterpart. Boo!

Risk aversion might have caught up to the euro and cost it its spot  in the bull limelight. It got some bull lovin’ at the expense of the  dollar and the yen during the Asian and European sessions thanks to  economic reports from Germany and Italy. Let’s take a look at them,  shall we?

Business confidence in Italy improved in July with the ISAE Business  Sentiment Index printing at 100.5 and beating the 98.5 forecast. The  country’s retail sales report also brought some good news when it  revealed that consumer spending was up 0.3% during the month,  overshooting the 0.1% consensus.

Whoohoo!

But wait, that’s not all! Unemployment also fell at an annualized rate 8.4% in July following June’s 8.5% reading and the CPI hit the analysts’ target at 0.2%. Germany might have helped lure in some bulls when it reported that only 17,000 workers were unemployed in July which was better than the 20,000 forecast.

Sadly, some analysts say that the data for the entire region might  not have been enough and gave traders more reasons to dump the euro. The  unemployment  rate for the entire region remained flat in July at 10%.  It came in as the market expected like the euro zone HICP which printed at 1.60%. 

Will the euro be able to make a comeback on the charts today? Hmmm, I  think we have to stay tuned to today’s [economic reports](http://www.babypips.com/tools/forex-calendar/) to answer that.

First on our schedule is the German retail sales at 7:30 am GMT and it is expected to come in at 0.5% for July, erasing its 0.3% decline in June. A few minutes after that, at 7:45 GMT, we have some manufacturing stats to sink our teeth into. The manufacturing PMI  for August of Italy is expected to print at 53.5 , that of Germany is  seen to be at 58.2 and for the entire region, it is seen to have  remained steady at 55. 

  That’s all we have on tap later but also make sure you gauge the market’s risk sentiment. Good luck!
306

“We’re on Patron pipquila, we’re drunk with pip-margarita” sang the euro bulls in yesterday’s trading they rock ‘n’ rolled on the charts. The euro snatched 131 pips from the dollar as EURUSD closed at 1.2803. Boo yeah! Both EURCHF and EURJPY also closed higher at 1.2996 and 106.46, giving the euro 129 pips and 162 pips respectively.

Boy did the euro bulls get pip-drunk! How? Well, just sit back and relax coz [Pip Diddy](http://www.babypips.com/blogs/pipnoculars/)’s here to give you the lowdown.

First there was the market’s improved appetite for risk that helped  offset the disappointing German retail sales report. Yesterday, we saw  that consumer spending was way off the 0.6% growth forecast when it  printed a 0.3% decline in July. Good thing its previous reading was  revised up to -0.3% from -0.9% and that might have cooled down concerns  that came with its release.

Lucky for the bulls the PMI figures didn’t attract bears. Yesterday, we saw that purchasing managers in France were generally more optimistic in August with the PMI up at 55.1 following July’s 54.7 reading. Germany’s PMI remained flat at 58.2, but it came in as expected. Whew! The region’s PMI also reflected optimism, printing at 55.1 and beating both the consensus and its previous reading at 55.0.

Adding more fun to the bulls party was Chinese Premier Wen Jiabao,  who said that China and western countries should chill out together to  boost investor confidence in the euro and EU’s economy. Whoohoo! He said  that he particularly wants to be buds with Spain because he wants to  help it reel in its debt.

Some also say that bad US data helped the euro close higher against  the dollar. Are we seeing a combo of fundies and risk appetite driving  price action? Hmmm, probably.

So other than gauging risk sentiment, I guess its best for us to also tune in to today’s economic reports. Let’s take a look at what we have on tap for the euro, shall we?

First up at 5:30 am GMT is the French unemployment rate which is expected to have increased by 0.1% to 9.6% in July. Then at 7:00 am GMT  we have Spain’s report on the number of unemployed workers. Bulls will  be looking for a reading lesser than it July reading of 73,800  to help  them hustle the euro.

  At 9:00 am GMT we’ll have the region’s PPI  report. It is expected that inflation pressures continued to ease with  the forecast for the August down to 0.1% following July’s 0.3% reading.  Along with that we also have the region’s GDP  figures for the second quarter and analysts are expecting economic  growth to have remained flat at 1.0%. But who knows, we could be in for a  pleasant surprise given the strong GDP figures that France and Germany announced earlier. 

Lastly at 12:30 pm GMT we have the ECB  press conference. I think my bud, [Forex Gump](http://www.babypips.com/blogs/piponomics/4_news_reports_to_trade_this_w.html), mentioned this in his  blog earlier this week. Anyway, the market is expecting that the central  bank won’t be hiking rates. What you will need to watch out for is the  accompanying statement by ECB Governor  [Trichet](http://www.babypips.com/forexpedia/Jean-Claude_Trichet). If traders find him giddy enough with optimism for the euro  zone’s economy, then we may just see the euro bulls continue their party  on the charts!
307

…And that makes it a hat trick! Fernando Torres of Liverpool could learn a thing or two from the euro, eh? Hah! While it ranged for most of the day, EURUSD recorded its third consecutive daily climb as it closed 19 pips higher at 1.2822.

As expected, the ECB announced yesterday that it has decided to keep rates steady at 1.00%. But during the press conference that followed, ECB President Jean-Claude Trichet expressed surprise that recent economic stats for the euro zone have been better than expected. Perhaps this is what prompted the ECB to raise its growth forecasts from 1.0% to 1.6% for 2010 and from 1.2% to 1.6% for 2011.

Still, Trichet believes the road to recovery won’t be a walk in the park. He added that the economic rebound will probably proceed at a moderate pace though there is still a great amount of uncertainty involved. Could this be the reason why the ECB decided to extend its emergency lending program?

Later today, the euro zone is scheduled to release its July retail sales figures at 9:00 am GMT. Analysts are predicting a 0.3% uptick for July after seeing sales unchanged in June. Look for the euro to weaken ahead of the release of the US’s NFP report (due 12:30 pm GMT) if results come in weaker than expected!

308

The euro bulls boogied into pip-wonderland during Friday’s trading. Oh yeah! EURUSD closed 69 pips higher at 1.2891 and so did EURJPY with 85 pips at 108.85 and EURCHF with 130 pips at 1.3117. So what got the euro shakin’ its currency booty?

Well, first there were the relatively positive economic reports from the region. Last Friday we saw that the Italian and French services PMIs for August came in at 51.4 and 60.4 beating their respective forecasts which were at 50.0 and 59.9 respectively. The services PMI for the entire region might have also impressed traders when it printed at 55.9, overshooting the consensus which was only at 55.6.

Growth in the services sector in August contributed to the region’s overall PMI reading which printed at 56.2 which was 0.1 higher than what the analysts expected.

These might have been enough to offset the negative vibes brought about by Germany’s services PMI which came in at 57.2 and disappointed the 58.5 consensus, and the retail sales report which fell short of the 0.3% forecast for July when it only printed at 0.1%. Then again, the previous reading for the latter was revised to 0.2% from 0.0% so I guess it was all good in the hood.

There was also the positive comment of ECB member Mario Draghi who said that investment and consumption in Europe are already revving up. Holla! Another central bank member, Jose Manuel Gonzales-Paramo, also spoke on Friday. He said that liquidity measures must be phased out gradually along with normalization as banks are becoming more hooked to it. Hmm, I wonder this also means that the ECB thinks that banks are fit enough to stand on their own…

Looking forward, it seems like we have a relatively light week ahead of us for the euro. Today we only have the Sentix index at 8:30 am GMT. It is expected to show that analysts and investors are less optimistic on the economy this September than they were in August with the forecast down to 7.8 following its previous reading which was at 8.2. After thirty minutes, we’ll get the lowdown on the region’s trade balance figures for August. The market is expecting to see exports to have outpaced imports by 2.4%.

If the actual numbers come in better than expected then we may just see the EURUSD boogie past the 1.2900 handle so make sure you tune in to that!

309

The euro was enjoying the market’s spotlight as it reached its three-week high at 1.2919 against the dollar when the bears started to rain on its parade. Doesn’t that just remind you of how Taylor Swift was so rudely interrupted by Kanye West during her speech in last year’s MTV Video Awards? Ugh!

Anyway, from there it was no love story for the shared currency as EURUSD ended the day 18 pips lower at 1.2875. Where did all the euro lovin’ go?

Well, first there was the confidence report from Sentix which showed that European investors and analysts are becoming less optimistic about the EU economy. The index came in at 7.6 which disappointed the 7.8 consensus and was lower than July’s 8.2 reading. Boo! Another reason why the euro was unable to hold on to its gains was because a number of bulls decided to just call it a day, took profit and left the shared currency hangin’. Tsk, tsk.

However, I have a feeling that the worst isn’t over for the euro. Earlier today, the shared currency weakened against its lower-yielding counterparts as a report highlighting the leniency of the EU stress tests drove away the bulls. Uh oh… I think my buddy Forex Gump will be talking more about this on his blog for today.

Not all hope is lost though. The Finance Ministers of the European Union will meet later at 6:00 am GMT. Who knows, they may offer some words of comfort that could convince the bulls to spread some euro lovin’ again. Then at 10:00 am GMT we have the report on German factory orders. It is expected that the value of orders placed with German manufacturers was down 0.5% in August following its 3.2% reading in June. A better-than-expected figure may be enough for the euro to regain some of its losses against the dollar.

Good luck and be careful with your trades!

310

Ouch, that’s gotta hurt! EURUSD plummeted by almost 200 pips yesterday when the reports revealed that there was something fishy going on with European banks. And it doesn’t help that the banks in question are from those countries with debt problems!

Wall Street Journal reported that some European banks understated their holdings of sovereign debt, causing many to think that the stress tests failed to report the real risk exposure of these banks. According to the Bank of International Settlements, an international organization for economic and monetary research, the actual debt holdings of some banks were more than twice as much as those reported in the stress tests. With that, many traders began to doubt the better-than-expected results of the stress tests, dumping the euro in the process.

What’s next for the euro? Well, you might wanna check out Forex Gump’s latest article about that!

Today, Germany and France, euro zone’s top two economies, are set to report their trade balance. Germany’s trade surplus is expected to widen from 12.3 billion EUR to 12.8 billion EUR while France’s trade deficit is projected to swell from 3.8 billion EUR to 4.1 billion EUR. Kinda mixed, don’t you think?

If those trade balance reports don’t steer the euro in a clear direction, the German industrial production data just might do the trick. After suffering a 0.6% decline in June, industrial production is expected to post a 1.1% uptick for July. If the actual figure meets or beats the consensus, it could provide a bit of support for the euro. Still, I have a feeling that traders are still hesitant to buy up the euro in light of the recent revelations about European banks’ debt holdings.

311

Phew! Looks like the euro got the breather it needed yesterday, as it managed to stay afloat versus the dollar. After setting a new weekly low at 1.2665, the pair rose up and even gained 20 pips on the day from its opening price to end at 1.2714.

A day after the euro got put in the slammer after renewed concerns regarding the latest stress tests, the Committee of European Bank Supervisors came out and delivered a statement. Remember, it was CEBS that carried out the stress tests, so it was their reputations on the line! The statement was supposed to explain why the latest figures from the BIS differed from those that European banks sent in for the tests.

Unfortunately, the statement was an uber failure! Okay fine, I exaggerate a lil’ bit, but the statement did fail to explain what really happened. They just said that the way the BIS compiled their figures used different dates and methods, so it would be difficult to compare to their figures. The markets barely even paid attention to the statement!

In other news, German and French trade balance data pretty much hit consensus. France posted a deficit of 4.18 billion EUR, while Germany’s surplus widened to 13.5 billion EUR. Meanwhile, German industrial production figures were a little disappointing, printing growth of just 0.1% for the month of July. This failed to hit projections of 1.0% growth. Then again, you could always take the glass half-full approach and notice that it was still a nice improvement from the previous month’s decrease of 0.6%. Some growth is better than no growth!

Looking ahead, keep an eye, ear, nose - whatever you use to keep track of the markets - German CPI data and the ECB monthly bulletin due at 6:00 am GMT and 8:00 am GMT respectively. Take note though, that these reports aren’t generally regarded as having a high impact on the market. Aside from those reports, watch out for any more news regarding the recent concerns surrounding the stress tests.

312

Chop chop! Euro trading was as choppy as an old school boot leg VHS tape, as the pair was all over the place. The end result in EURUSD was that it pretty much stayed within range, closing just 9 pips lower at 1.2704.

As I mentioned yesterday, the only piece of economic data being released from the euro zone was German CPI data. The report showed that annualized inflation stands at 1.0%, which was slightly better than the forecasted 0.9%. Still, it hardly caused a ripple in the markets as it shows that inflation remains subdued. It’ll take a lot more than 1.0% before our buddies over at the ECB get off their butts and raise the interest rate roof.

Meanwhile, we got a whole bunch of comments from ECB officials and if there was one thing they had in common, then well, I missed it! Their comments were all over the place, as they failed to deliver one coherent look on the future of the economy. This was probably a reason why EURUSD failed to move in one concrete direction.

For today, we’ve got tons of low tier data coming out from all over the euro zone. From France, we’ve got manufacturing and industrial production. From Spain, CPI reports. And from Italy, GDP data is on deck. Tons of reports that may cause minor volatility in the markets, which could help you catch a few pips here and there! Be careful though, as you may never know what news may be released and rocked the markets! Good luck today! Hope you end the week with a bang!

313

“Work it harder make it better do it faster makes us stronger” After taking a beating from the markets for most of last week, the euro did a Daft Punk number last Friday on an improvement in risk appetite. EURUSD closed a hair away from its open price at 1.2711 after dropping to an intraday low of 1.2644. Meanwhile, EURJPY inched 54 pips higher to a 107.03 closing price.

So why didn’t the euro gain as much as the other risk-related currencies? Aside from lingering concerns on the region’s debt problems, last Friday’s production data showed mixed results. While French industrial production improved by 0.9% after declining by 1.7% last June, Italy missed it’s 0.4% growth expectation by printing at 0.1%.

Will this week be any better for the common currency? ECB President Trichet will blast the week off for the euro when he gives his speech today after the 6:00 am GMT BIS meeting in Basel. Let’s hope he has some good news on the region’s banks!

Next, the ZEW reports tomorrow at 9:00 am GMT will take center stage, and better-than-expected results just might charge the euro bulls enough to extend the euro’s gains.

The CPI report on Wednesday at 9:00 am GMT and the current account on Friday at 9:00 GMT might also get the back-from-the-summer traders, as these reports can give us clues on local and international demand for the region’s goods.

319

“Pip victory! Take it! It’s yours!” The currency bulls charged the euro to a victory across the charts yesterday after positive reports in the markets brought back risk appetite with a vengeance. EURUSD rocketed by a whopping 144 pips and closed at1.2876, while EURJPY capped the day off with a 34-pip win at 107.72.

It seemed that the markets got all pumped up when the European Union revised its 2010 growth forecasts. From its earlier 0.9% growth prediction, the growth in the region is now expected at 1.7%! Awesome!

But that’s not all! The currency bulls also got a lift from the better-than-expected economic data in China, as well as the ECB President Trichet’s optimism on the new banking regulations for world banks. This boosted not only the comdolls, but also the other risk-related currencies.

Will the markets keep the happy tune goin’ for the euro? Maybe the German ZEW economic sentiment report at 9:00 am GMT can tell us more. The data is expected to cool to a 10.7 index reading from its 14.0 figure last August, but a better-than-expected number might keep the euro chugging all the way to intraday highs.

The industrial production report will also be on the spotlight at 9:00 am GMT, and a higher figure than last August’s 0.1% decline can also keep the euro bulls charged for another trip up the charts.

The last hurrah of the day will come from Deutsche Bundesbank President Axel Weber when he gives his speech in Berlin at 3:00 pm GMT. Let’s hope he has good news to tell!

Happy trading, folks!

320

Investors threw their hands up in the air saying “EURO” as EURUSD closed at 1.3008 yesterday, just 28 pips below its five-week high. Whoa! EURJPY also ended the day higher at 1.0807 after opening at 107.72.

  It was impressive how the euro was able to strut its swagger on the  charts despite the mixed economic reports we got yesterday. Let’s take a  look at them, shall we?

  First there was the current economic sentiment reports from ZEW.  Germany’s index came in at 59.9 and overshot the 50.0 consensus, while  the one for the overall region printed an improvement from its -13.0  reading for August, at -6.3.

  However, it seems like analysts and investors think that the worst  is yet to come for Europe in the next six months. The growth outlook for  Germany posted a 4.3 decline, disappointing both its 10.0 growth  forecast and its previous reading which was at 14.0. On the other hand,  that for the euro zone slumped to a 19-month low at 4.4. The market had  been eyeing a softer decrease in [ZEW’s Economic Sentiment Index](http://www.babypips.com/forexpedia/ZEW_Survey) at 14.5 to follow its 15.8 figure in August. But no…

  Why the divergence in the current sentiment and the future outlook?  Hmmm, I’m guessing it could be because analysts and investors see  Europe’s debt crisis ghosts coming back to haunt its economy soon.

  But anyway, the bad news didn’t end there for the euro. Eurostat  also reported that July’s industrial production index fell short of the  0.1% prediction when it came in at 0.0%. 

  So what boosted the euro’s ego?

  A few analysts are saying that maybe it was because of the Chinese  government increasing the country’s euro holdings. Hmm, it makes sense. I  mean it was only a few weeks ago that Chinese Premier Wen Jiabao said  that the Chinese are willing to lend out a helping hand to debt-stricken  European countries like Spain, in order to boost investor confidence in  the region. However, I have a feeling that if more bad news spring from  Europe, China may also hold back from its euro investments. Uh oh…

  Anyway, today we only have the region’s [inflation](http://www.babypips.com/forexpedia/Inflation) report to look forward to at 9:00 am GMT. The headline HICP figure for August is expected to print an annualized increase of 1.6% while Core HICP is seen to come in at 0.9%. Aside from that, be on your toes for news that could affect the market’s risk sentiment. 

  Good luck and happy trading!
321

“That’s not the coolest thing to do right now, but we’ll take it!” The European Commission might not be a fan of the Bank of Japan’s currency intervention yesterday, but they’re still thrilled on the move’s impact on the euro. EURJPY rose by 330 pips! Heavy selling of the yen boosted the pair to its 111.38 closing price. Meanwhile, EURUSD crawled 4 pips higher at 1.3012, but EURGBP dropped to a .8331 close.

Aside from the BOJ taking the center stage yesterday, the data from the euro zone was a snoozer, with the August CPI still at 1.6% and the core CPI steady at 1.0%. To top off the snoozefest, the employment change printed a flat growth for the second quarter. Pfft.

Only the trade balance report at 5:00 pm GMT is on tap today. The trade deficit is expected to narrow down to 0.7 billion EUR, but a better figure just might keep the euro rally chugging along.

The currency intervention might be over, but keep your eyes open for other surprises!

322

“I’m on a high, on a high…” The euro danced to the Duncan Sheik beat as it sustained its gains against its major counterparts yesterday. Strong economic reports from the region and weakness in the other economies capped EURUSD 67 pips ahead after hitting an intraday high of 1.3102.

Meanwhile, EURCHF rocketed by a whopping 214 pips on dovish SNB comments, and EURJPY hit a closing price of 112.26 after dipping to an intraday low of 110.66.

The Spanish debt auctions might have tickled the funny bone of the euro bulls when Spain sold their bonds due on 2020 for 2.32 times its initial offer price. This signaled investor confidence on the Spanish economy, and weakened the demand for other safe assets like the German bonds.

The trade balance report could’ve also put the smiling faces on the euro bulls when a decline in both imports and exports pulled the trade deficit down to 0.2 billion EUR. This is way better than last June’s 1.4 billion EUR deficit, and the expected 0.7 billion figure.

Will the euro rock the charts again today? The German PPI will start the day off at 6:00 am GMT. The producer prices is expected to cool to 0.3% from last July’s 0.5% growth, but a better-than-expected number might provide the euro bulls a tune to dance to.

Deutsche Bundesbank President Axel Weber will also hit the stage today at 7:30 am GMT. The ECB member will deliver a speech at Oestrich-Winkel (no, it’s not a winking bird), and a few hawkish comments might a provide further boost for the euro.

Last to make an appearance is the region’s current account at 8:00 am GMT. The figure is expected to narrow down to a 3.7 billion EUR deficit from June’s 4.6 billion figure, but a higher number could end the week on a positive note for the euro.

323

“I just can’t get enough. I just can’t get enough,” sang the euro last Friday as it went for more gains against the Greenback and the yen. Thanks to improved risk appetite, EURUSD reached a high of 1.3159 while EURJPY topped at 112.99 then.

Investors were in such a good mood last Friday that higher-yielding assets, such as equities, saw huge gains that day. The Nikkei chalked up a 1.23% increase during the Asian session while European stocks posted a 1% increase. This strong improvement in risk appetite carried over to the currency market, allowing the higher-yielding currencies to outpace the safe-havens.

On the economic front, not even the weaker-than-expected German PPI reading was able to dampen the euro’s spirits last Friday. Although the report showed that producer prices stayed flat in August, EURUSD seemed unfazed as it continued to climb towards the 1.3150 mark. However, when the US reported that consumer sentiment fell from 68.9 to 66.6 in September, the risk rally came to a halt. Because of that, EURUSD fell back below the 1.3100 handle and closed at 1.3038.

This week is bound to be an exciting one for the euro as euro zone is set to release a bunch of economic reports. The action starts on Wednesday when euro zone releases its industrial new orders report at 9:00 am GMT. After seeing a 2.5% increase in June, industrial new orders are projected to slide by 1.2% in July. After that, Belgium will release its business climate index at 1:00 pm GMT. This report could print an improvement in business sentiment, from -5.1 to -4.9 in September on. Later on, euro zone will report its consumer confidence reading for August.

Thursday is PMI day for the euro zone since the two biggest economies in the region, namely Germany and France, will release their manufacturing and services PMIs. Based on the consensus, it looks like many are expecting slight downticks in the manufacturing and services sectors of both economies. Could this push the euro back below the 1.3000 handle? The PMI-fest starts at 7:00 am GMT so make sure you stay tuned then!

Before the euro zone calls it a week, Germany will release its Ifo business climate report on Friday 8:00 am GMT. This report could show that business sentiment fell from 106.7 to 106.3 in September, suggesting that businessmen are slightly less optimistic this month. Watch out for that!

324

Rally and reverse. That’s exactly what the euro did yesterday as EURUSD fell back towards its weekly open price of 1.3053 after reaching a high of 1.3122. Meanwhile, EURJPY was stuck between resistance around 112.25 and support near 111.75.

The lack of top-tier reports from euro zone was probably the reason why the euro failed to make significant progress against the Greenback and the yen. Only the Italian trade balance was on yesterday’s docket and this report revealed that Italy’s trade deficit of 3.06 billion EUR turned into a 1.75 billion EUR surplus in July. Talk about exports outpacing imports by a mile!

Euro zone’s schedule is empty again today, which means that the euro could be in the mood for more consolidation. However, recent reports hinting that debt woes are still lingering in the euro zone could weigh the euro down. Just this weekend, the Financial Times reported that the ECB stepped in to help Ireland with its bond auctions, triggering speculations that the country might require additional financial backing from the ECB and IMF. Their Finance Minister may have reassured the public that Ireland is financially stable but the upcoming Irish bond auctions are expected to provide more insight on Ireland’s debt standing. Stay tuned for any updates on the Irish bond auctions since this could determine where the euro’s headed in the next few days.

Also keep your eyes and ears open for the FOMC statement later today. If the Fed confirms that they’d be implementing more easing policies, investors could shy away from buying the Greenback and move their money to other currencies.

325

“I’m the king of the pip-woooorld!!!” The euro felt like Titanic’s Jack Dawson yesterday as the increased appetite for the euro and the dollar weakness boosted the currency to new highs against its major counterparts.

EURUSD rocketed by 173 pips from its open price to a 1.3235 close on the Fed’s hints of another round of QE. Meanwhile, EURJPY ended the day 61 pips higher at 112.62, while EURCHF sailed by 70 pips at 1.3128.

Want to know the secret to the euro’s rise? I’ll give you a clue – it starts with “bond” and ends with “auctions”. It seemed that the euro bulls got all excited when the Irish, Greek, and Spanish bond auctions went better than many expected. Ireland, for example, managed to sell 1.5 billion EUR worth of government bonds yesterday. This was good news! Remember, there have been rumors that Ireland may default on its debt! Some doubted how much funds the Irish government could raise through the auction. I guess somebody out there had his three-leaf clover eh?

Will the euro sail through the charts again today, or will it give back some of its gains? The industrial orders report will start the day at 9:00 am GMT. The data for July is expected to show a 1.2% decrease from June’s 2.5% rise, but a higher number might provide extra steam for the euro ship.

The Belgium business climate report at 1:00 pm GMT will also rock the stage today, and a figure lower than September’s expected -5.0 index figure might mean that businessmen are starting to get skittish on the economy.

Last to hit the calednar is the region’s consumer confidence report at 2:00 pm GMT. The August figure is pegged at -10, down from July’s -11 number, but a better than expected result could keep the euro bulls motivated for another trip up the charts.

326

Back-to-back, baby! Euro action was explosive for the second day in a row as the currency dominated the charts yesterday. Coming off a successful bond auctions, the euro climbed further up the charts to stand tall against its major counterparts. EURUSD flew 157 pips to close at 1.3392, while EURJPY ended 59 pips higher at 113.22.

Confidence in the euro zone is slowly returning as bond auctions from Greece, Ireland, Portugal, and Spain all turned out successful. The euro has been the currency of choice of many investors who have chosen to abandon the weakened USD. In fact, it’s been one of the biggest gainers since the USD started its free fall!

Investors were so giddy over the good news that they decided to shrug off the negative industrial new orders report. Orders fell 2.4% in July, which is not only well below the previous month’s record of a 2.4% uptick, but is also worse than the forecasted 1.4% decline. As a good gauge of future demand, a downtick in this report could spell a decrease in future manufacturing activity.

Likewise, the EC flash consumer sentiment report turned out negative, posting a reading of -11 for the second time in a row. It will be interesting to see how consumer sentiment will be affected after investors showed so much confidence in the euro zone in the recent bond auctions.

Later today, you’ve got a set of PMI reports coming your way.

At 6:58 am GMT, France is set to publish PMI reports for both its manufacturing and services sectors. The French manufacturing PMI is expected to fall from a reading of 55.1 to 55.0, while the services PMI is anticipated to drop from 60.4 to 60.0.

Germany follows up with its own manufacturing and services PMI reports at 7:28 am GMT. Analysts say the services PMI is likely to stay at 57.2, while the manufacturing PMI is forecasted to decline from 58.2 to 57.6.

At 7:58 am GMT, we round it all up with PMI reports for the euro zone as a whole. The manufacturing PMI is predicted to decrease from 55.1 to 54.5, just as the services PMI is expected to drop from 55.9 to 55.5.

Stay sharp out there, guys! The euro may just extend its gains if these reports print upside surprises!

327

No surprises here! After rising strongly the past couple of days, the euro finally slumped down. What goes up must come down, right? EURUSD hung high early in the day, ranging just below the 1.3400 psychological handle. But that was about as high as it got. It eventually gave in to the will of sellers as it fell from its opening price of 1.3392 to hit an intraday low of 1.3306.

The euro’s plunge began with the release of PMI reports. France started it all by reporting a slightly stronger manufacturing services sector as the PMI rose from 55.1 to 55.4, besting forecasts for a reading of 55.0. However, this good news was offset by the worse-than-expected services PMI which came in at 58.8, 1.2 lower than anticipated.

Bears prepared for another round of selling as Germany, the euro zone’s brightest star, posted its own data. The German services PMI dropped from 57.2 to 54.6, while the manufacturing PMI plummeted from 58.2 to 55.3.

As a whole, the euro zone fared just as badly. The services PMI for the region declined from 55.9 to 53.6 in September, just as the manufacturing PMI decreased from 55.1 to 53.6.

These figures aren’t all too negative if you really think about it. They are still indicative of growth in the region. But the way they dropped so drastically is beginning to stoke fears of a slowdown. Could the euro zone really be headed for a double dip recession? It gives me chills just thinking about it!

Up ahead, we have the German IFO business climate report. No, it has nothing to do with global warming! The survey measures current and expected business conditions across different industries in Germany. According to analysts, the report will probably downgrade its reading from 106.7 to 106.4 in September. You’d best be on guard when the results come out at 8:00 am GMT. You wouldn’t want to be caught unprepared in the event that the report cooks up a storm on the charts, would you?

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“[I]Ain’t no mountain high enough…ain’t no river wide enough to keep me from getting to youuuu…[/I]” The euro did a snazzy Gaye Marvin number last Friday when it overwhelmed its major counterparts and erased all of its losses last Thursday. EURUSD hit a five-month high and ended the week at 1.3491, while EURJPY finished off its 137-pip gain at 113.70.

After seeing gloomy PMI figures last Thursday, the euro bulls got all excited over last Friday’s German business confidence report. The data clocked in at 106.8, which was not only better than the expected drop to 106.4, but was also the highest since June 2007. Talk about finding a way back into love!

Will Germany’s data continue to support the euro? The country’s CPI, retail sales, unemployment, and consumer climate reports are due this week. The French consumer report and Italian unemployment data will also hit the spotlight, and better-than-expected figures just might keep the party goin’ for the euro.

But today, aside from the money supply report at 8:00 am GMT, we will see ECB President Jean-Claude Trichet deliver his speech in Brussels at 1:00 pm GMT. Will he drop clues on the ECB’s next moves? Don’t even think of sitting this one out!

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Action on EURUSD was about as boring as it could get. Heck, it put me to sleep faster than a lullaby from Cyclopip! (Just kidding. Cyclopip has a terrible singing voice!) Traders refused to take the pair anywhere as EURUSD traded sideways and closed just 15 pips lower at 1.3472.

The lone report published yesterday was the M3 money supply data which reported a better-than-expected increase of 1.1% year-on-year, surpassing forecasts for a 0.4% uptick. However, ECB President Trichet stole the spotlight when he said that although recent economic data have been putting smiles on their faces, there is still a lot of uncertainty involved when it comes to the euro zone’s economic outlook. He added that inflation is expected to rise in the short term, but should moderate as time goes by.

Maybe things will finally pick up when the German CPI preliminary figures for September come out later. Analysts are expecting to see a 0.2% drop in prices after August recorded a 0.1% increase. Will the CPI report follow the footsteps of last week’s import prices report and come in worse-than-expected? Find out at 6:00 am GMT!

At the same time, the German GFK consumer sentiment report is due and is slated to upgrade its reading from 4.1 to 4.2 for the month of September. After yesterday’s snorefest, traders must be itching to move EURUSD! Euro bulls, get ready! You could be in for a breakout play if it prints an upside surprise.