Daily Economic Commentary: Euro zone

Trading Discussion News and Economy
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The euro headed downhill against the dollar yesterday as risk aversion took hold of the market again. After it had gapped up to start the week on a strong note, EUR/USD was sold-off all throughout the day to close the U.S. trading session 197 pips lower.

It seems like the plunging global equity markets due to Standard & Poor’s downgrade of U.S.’s sovereigndebt took a serious toll on sentiment. It resulted in investors taking their money out of high-yielding instruments and transferring them to safe haven assets like the Greenback (ironically).

The only piece of data coming out of euro zone that could potentially have an impact on the euro is the German trade balance. Scheduled to come out at 6:00 am GMT, the report is expected to show that the trade surplus increased to 12.9 billion EUR from 12.8 billion EUR the previous month. Let’ see if the positive forecast on the report will be able to provide support for the euro.

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Euro pairs were off to a weak start during the Asian and London sessions but managed to squeeze in a few gains during the last few hours of the New York session. EUR/USD closed more than a hundred pips up from its 1.4210 open price while EUR/JPY landed above the 111.00 handle. Can the euro hold on to its gains today?

Euro zone didn’t release any top tier data yesterday as risk aversion weighed on the euro pairs for almost the entire day. It wasn’t until the end of the U.S. session, when the FOMC made their interest rate decision, that risk appetite returned and boosted EUR/USD and EUR/JPY. If you wanna know what the Fed had to say during their monetary policy statement, you should also read my U.S. economic commentary.

Today, only the French industrial production report is on euro zone’s schedule. The report could show that industrial production ticked down by 0.1% in euro zone’s second largest economy. Better than expected results could provide support for the euro so watch out for the release around 6:45 am GMT.

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Rumors are like wildfire; you are burned up before you know it! After its strong rally last Tuesday, the euro crashed and burned on the unfounded rumors that the SocGen, a large European and a major financial services company, was in financial trouble yesterday. While SocGen denied the rumors shortly after, the damage had already been done and the euro was unable to recuperate its losses. EUR/USD ended the U.S. trading session at 1.4178, more than 150 pips from its opening price that day.

Data released yesterday was of no help to the euro. The French industrial production report came in worse than expected at -1.6%. The German Final CPI, on the other hand, was in line with forecast and showed a 0.4% gain.

No tier 1 data today on euro zone’s economic calendar so the euro will most likely be driven by the market’s overall sentiment. Currently, traders seem to be extremely bearish on currencies that AREN’T considered safe havens. Keep an eye out on the dollar, the Swissy, and the yen folks, as they could continue to rally versus the euro today!

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The candlesticks on the daily chart of EUR/USD are beginning to look a lot like Cyclopip’s favorite striped Christmas sweater! Thanks to risk appetite, the euro was able to take home the bacon, ending the day with a 47-pip gain at 1.4228.

Risk appetite picked up yesterday with the rally in equities taking centerstage. It also might have helped that German Chancellor Angela Merkel announced the she would meet with French President Nicolas Sarkozy to address talks about the debt contagion spreading to France. Perhaps it gave investors hope that policymakers would soon come up with concrete and long-term solutions to address the debt crisis.

With that said, make sure you gauge [market sentiment](http://www.babypips.com/school/what-is-market-sentiment.html) in today’s trading, ayt? If there are enough good vibes left, we may just see the euro end the week with a win.

Also, make sure you keep tabs on the roster of economic reports we have on tap from the [Euro Zone](http://www.babypips.com/school/euro-zone.html) today. At 5:30 am GMT, the French preliminary [GD](http://www.babypips.com/forexpedia/Gross_Domestic_Product_(GDP))P report for Q2 2011 will be released and it is expected to print a 0.3% uptick. Meanwhile, the country’s [CPI](http://www.babypips.com/forexpedia/CPI) report for July is seen to come in at -0.2%.

Then at 6:45 am GMT, France’s preliminary non-farm payrolls report for is anticipated to show that the number of employed people grew by 0.2% during the second quarter of the year.

Lastly, at 9:00 am GMT, we’ll get dibs on Euro Zone’s industrial production report for June. Analysts have predicted that the report would show a 0.1% uptick.
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The euro may not have gained much against the dollar, but it did a hell of a job against the Swiss franc! It simply shrugged off last Friday’s weak euro zone data and pushed EUR/CHF up 221 pips to close above 1.1000. Now THAT’S gangsta!

It looked as though the euro was about to have another bad day as French preliminary GDP was a little bit disappointing. Instead of recording 0.3%, GDP growth came in flat in Q2 2011. Apparently, a slump in consumer spending and dwindling exports had the French economy on the brink of contracting!

Surprisingly enough, despite the fact that the economy’s performance was sub-par last quarter, the French labor market managed to chalk up awesome gains. French preliminary non-farm payrolls posted a 0.4% rise in Q2, twice what was expected!

Unfortunately, the joy from seeing that report was short-lived as euro-area industrial production data printed sad results later in the day. According to June data, production fell 0.7% month-on-month versus the forecasted 0.1% increase as 15 of the member states posted declines, 5 posted increases, and 1 remained stable. No doubt, this is one aspect of the economy that the euro-area will need to improve on if it wants to hasten its recovery.

Today’s a good day to be a banker in Italy and France because both economy giants are celebrating bank holidays! However, this means that we’ll have to wait until tomorrow for a taste of euro zone data. But don’t worry, it’ll surely be a treat because we’ve got German GDP on tap at 6:00 am GMT. Don’t miss it, kids! It could be a big market-mover!

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Unlike what Jessie J suggested in her hit, it was all about the money yesterday in the markets. It certainly helped the euro! A risk-friendly market environment and a few positive reports from the euro region boosted EUR/USD to a high near 1.4500 before it settled with a 180-pip gain at 1.4441.

A series of mergers and acquisitions helped set for a risk-friendly environment in the Asian session yesterday, so traders found it easy to stock up on the euro during the London and the U.S. session. Of course, it probably helped the euro that the details of the ECB’s bond-shopping last week was more bullish than markets had expected.

In a report released yesterday, the ECB revealed that it bought 22 billion EUR of government bonds last week, a bit more than the expected 15-20 billion EUR figure. The higher-than-expected amount suggested that the ECB is determined to actively intervene against debt contagion especially in the Spanish and Italian economy.

Let’s see if the German GDP report can add up to the euro-bullish reports today when it is released at 6:00 am GMT. Market geeks are only expecting a 0.5% growth in the second quarter against the 1.5% rise in Q1, but a higher number might keep the euro rally going. Also released today are the French GDP report at 9:00 am GMT and the whole region’s trade balance report around the same time.

Good luck in trades today!

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“Oh, woe is me!” cried the euro yesterday as it chalked up another losing day against its counterparts. EUR/USD closed 33 pips below its 1.4442 open price while EUR/JPY found resistance at 111.00 and ended at 110.59. Meanwhile, EURCHF tried but failed to move past the 1.1500 level. Will the euro have another losing day today?

Poor economic figures dampened the euro’s spirits during the start of the London session as Germany and overall euro zone released weaker than expected GDP readings. Germany grew by only 0.1% during the second quarter of this year, much less than the predicted 0.5% expansion, while euro zone grew by a mere 0.2%. That’s dangerously close to negative growth, if you ask me! Could this be what Forex Gump was referring to when he said that Europe has new troubles ahead?

The euro found a bit of relief when the meeting between German Chancellor Merkel and French President Sarkozy yielded hopeful results. In order to ensure the stability of public finances in the region, the two heads of state resolved to create a new council that will meet at least twice a year and proposed a new tax plan. However, they decided against the creation of eurobonds, saying that these aren’t the solution to the region’s debt woes.

Today, euro zone is set to release their CPI and core CPI figures for July. Headline inflation is expected to stay steady at 2.5% while core inflation could rise from 1.6% to 1.7% on an annualized basis. Watch out for the actual figures due 9:00 am GMT because another round of weak data from the euro zone could hurt the euro.

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It was a topsy-turvy day for the euro, which was simply all over the place in yesterday’s trading. EUR/USD spiked to as low as 1.4325 at the start of the London session, before recovering on improved risk appetite. The pair then soared to as high 1.4518, before giving back some of its gains to close at 1.4435, marking just a 26 pip gain on the day.

The main reason why the euro recovered midday was due to an improvement in sentiment, as well as traders warming up to the ideas brought about during the meeting between Sarkozy and Merkel the day before. The question is, how long can this sentiment keep up?

In other news, euro zone headline CPI figures came in as expected at 2.5%. Interestingly, core CPI came in much lower than anticipated, printing at 1.2%. This was a major drop from last month’s 1.6% figure, and the expected 1.7%. This indicates that without including food and energy, prices are actually dropping. This would further support the notion that the ECB should hold out on any rate hikes in the meantime.

No biggies on the docket today, so it is possible that we’ll see more consolidation in today’s trading. Good luck trading homies!

561

The euro got heavily beaten by the lower-yielding currencies during yesterday’s trading as risk aversion loomed over the markets. EUR/USD tumbled from a high of 1.4452 to a low of 1.4271 before closing at 1.4336. Meanwhile, EUR/JPY closed 25 pips below the 110.00 handle. Keep reading to find out whether we’re in for more euro weakness today.

Euro zone didn’t release any economic data yesterday, leaving euro pairs vulnerable to risk sentiment. Unfortunately for the euro, traders got the goosebumps from Morgan Stanley’s downgrade of global economic growth and flocked to the safe-havens. It didn’t help that Morgan Stanley specified that the U.S. and Europe were both dangerously close to a recession, just like Forex Gump hinted in his recession infographic the last week!

What’s worse is that the U.S. printed weak economic data during the U.S. session, confirming that major economies could really be in big trouble. Don’t forget to drop by my U.S. economic commentary to see which reports turned out to be disappointments.

For today, only the German PPI is on tap from the euro zone. The report could show a 0.2% uptick in producer prices for July, up from the 0.1% increase seen last June. Weaker than expected results could push the euro even lower so watch out for the actual data at 6:00 am GMT.

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How’s THAT for resilience! After taking a bad beating on Thursday, the euro bounced back to post respectable gains against its major counterparts. EUR/USD closed 57 pips higher on the day at 1.4395 after hitting a low of 1.4259, while EUR/JPY rose 36 pips to finish at 110.11. But was this just a dead cat bounce?

Though it didn’t really do much to rile up euro bulls, German PPI came in surprisingly positive. Producer prices increased 0.7% month-on-month in July, much higher than the 0.2% rise that traders were expecting to see. Year on year, this translates to a solid 5.8% increase! Of course, if PPI continues to climb at such a strong pace, it could result in a higher CPI, which in turn makes a good argument for further monetary policy tightening.

For the week ahead, we’ve got quite a number of reports to keep an eye on.

Tomorrow between 7:00 am and 8:00 am GMT, we’ll practically drown in reports as French, German, and euro zone manufacturing and services PMI data will be rolled out. Expect to see a lot of red as forecasts say we’ll probably see softer figures all across the board.

Then at 9:00 am GMT, prepare to feast your eyes on the ZEW economic sentiment report. The euro zone version of the report is expected to ease from -7.0 to -6.2, while the German version is anticipated to worsen from -15.1 to -24.6.

Wednesday picks up with more German data as the German IFO business climate index is due for release at 8:00 am GMT. However, this report isn’t expected to cheer anyone up as it’ll probably downgrade its reading from 112.9 to 111.3 if analysts are to be believed.

In any case, the key to trading the euro this week is to remain flexible. As we saw last week, it was all over the place, rising strongly one day only to come falling sharply the very next. Some say last Friday’s rally was nothing but a dead cat bounce and that the euro remains vulnerable to concerns about European banks and the global economy. That being said, I’m inclined to believe that the euro could be in for an extended slide if risk appetite doesn’t improve significantly this week. Good luck, kiddos!

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Without any economic data on tap, the euro seemed lost in the charts during yesterday’s trading. EUR/USD rallied to its intraday high of 1.4437 at the wake of the London session but it ended the day 15 pips below its opening price at 1.4364.

But don’t worry! Looking at our forex calendar, it looks like we have a lot of economic reports on tap for the euro to groove its currency-booty to.

First up, we’ll have the French manufacturing and services PMIs on tap at 7:00 am GMT. Manufacturing activity in the country is seen to have slowed a little bit this month with the forecast down at 50.1 versus the 50.5 reading we saw for July. Meanwhile, a modest improvement to 53.3 is eyed for the services PMI after printing at 53.2 last month.

Then at 7:30 am GMT, it will be Germany’s turn to release its PMI figures. Its August manufacturing PMI is eyed at 50.9, while its services PMI is anticipated to come in at 52.1.

A few minutes later at 8:00 am GMT, euro zone’s manufacturing and services PMI will be released and it looks like analysts don’t have their hopes up for the reports. Overall manufacturing activity in the region is seen to have slowed, with the index eyed at 49.6 versus the 50.4 reading for July. The forecast for the services PMI is also lower at 51.0 than the previous reading of 51.6.

We’ll then cap off our day with the German and euro zone ZEW Economic Sentiment reports. With the region’s sovereign crisis still far from being resolved, analysts are expecting to see that sentiment deteriorated in August with Germany’s index eyed at -24.8 and EZ’s figure anticipated at -6.2.

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Sometimes it’s an enemy, but yesterday it was a friend! Economic data in the form of cool manufacturing and services PMIs gave the euro a hand as EUR/USD rallied to tap the 1.4500 handle. Though it eventually gave up some of its gains early in the New York session, the pair managed to close the day 79 pips higher at 1.4443.

The manufacturing and services reports from Germany, France, and the euro zone as a whole were all expected to show declines for the month of August, but things didn’t exactly turn out as expected.

Save for the French manufacturing PMI and German services PMI, all of yesterday’s PMI reports surpassed forecasts, to the delight of euro bulls! Overall, the manufacturing PMI for the entire euro zone rose posted a figure of 49.7 (versus 49.6 forecast) while services PMI clocked in at 51.5 (versus 51.0 forecast). But keep in mind, though these numbers aren’t as bad as many had feared, they are still dangerously close to recession levels!

But apparently, though these figures are both slightly lower than last month’s, it was enough to provide relief for investors who’ve turned anxious from recent economic data. In fact, it completely overshadowed the ZEW economic surveys!

The German ZEW survey dropped its reading from -15.1 to -37.6 just as the euro zone version plummeted from -7.0 to -40.0. It seems the fear of recession in the U.S. and the many economic and political problems surrounding the euro zone have caused economic sentiment to deteriorate considerably over the past few weeks.

For today, the main report to keep an eye out for is the German IFO business climate survey, due at 8:00 am GMT. Look for it to follow in the footsteps of yesterday’s ZEW report and drop its reading from 112.9 to 111.2. Similarly, industrial new orders data is expected to soften when it comes out at 9:00 am GMT. Forecasts have it showing a 0.6% for June following May’s 3.6% uptick.

Though these reports have the potential to move the markets, don’t lose sight of the big picture! The euro zone still faces serious problems as discussions about Greece’s bailout have turned for the worse. With that in mind, the euro will face considerable headwinds. However, with the U.S. in trouble as well, it could also find itself on the receiving end of USD shorts. In times like this, it’s important to stay flexible. Good luck, kids!

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Mixed results for euro pairs, but for the most part, they all remained within range. EUR/USD traded within a range of 100 pips and closed 20 pips lower at 1.4421. Meanwhile, EUR/JPY edged higher late in the New York session to finish at 111.02, up 28 pips for the day.

As expected, the German IFO business climate report disappointed, as it printed at 108.7, a significant decrease from the previous month’s score of 112.9 and short of the expected 111.2 figure. Given everything that’s happening on both sides of the Atlantic, I’m not surprised that German business owners ain’t that optimistic about the economy.

The problem here though, is that Germany is the biggest economy in the euro zone and has been making up for the slack for the rest of the euro zone. With both the ZEW and IFO reports showing a bleak outlook, this doesn’t bode well for Germany and the euro zone as a whole.

For today, we ‘ve got the GFK consumer climate index coming in at 6:00 am GMT. The index is projected to have a reading of 5.2, just a slight decrease from the 5.4 we saw in last month’s release. However, given the poor results we’ve seen this week, don’t be surprised if we see another disappointing result today.

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“Bad data? We don’t care,” exclaimed the bulls yesterday as they managed to keep the euro afloat in the charts despite a weak Gfk Consumer confidence survey. EUR/USD ended the U.S. trading session at 1.4386, merely 36 pips lower from its Asian session opening price.

The Gfk consumer confidence survey released yesterday printed a reading of 5.2, lower than the 5.3 reading seen the month before. It was the lowest reading in 10 months.

Today, the only important data release from euro zone’s forex calendar is the M3 money supply report at 8:00 am GMT. The M3 money supply is watched closely by traders because it is positively correlated with interest rates. An increasing money supply usually leads to inflation, which, in turn, prompts the central bank to raise interest rates. The market expects a 2.2% increase, slightly lower than the 2.1% rise seen the month before.

The Jackson Hole meeting at 2:000 pm GMT may also have a strong impact on the euro’s value. Federal Reserve Ben Bernanke’s speech will be closely monitored by the market as he may provide some clues as to with the what the Fed is planning to do next. Watch out for that!

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The euro finished the week off on a solid note, as it took advantage of some crazy moves on Friday. EUR/USD rose 110 pips, closing just below the 1.4500 handle. Can the euro sustain this momentum this coming week?

While German import prices came in scorching hot at 0.8%, which was way higher than the anticipated 0.2% uptick, I don’t think it was the reason for the euro’s good fortune last Friday. Instead, I believe that traders bought the euro as U.S. Fed President Ben Bernanke didn’t exactly close the door on more quantitative easing during his speech at the Jackson Hole Symposium.

If you wanna learn more about what was said during the economic meet-up, I suggest heading over to my U.S. commentary!

For today, we’ve got the German preliminary CPI report on tap. Word is that inflation remained steady in August, but considering the strong PPI showing, we may just see CPI beat forecast as well.

Also, make sure you tune in at 1:00 pm GMT, as ECB President Jean Claude Trichet will be speaking in front of the EU Economic Committee. Trichet will be discussing the debt crisis and possibly what methods the central bank will take to contain it. This could prove to provide some sparks in the market, so watch out!

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Ain’t no talk of sovereign debt kept the euro from rallying on Monday. EUR/USD stayed well above the 1.4500 handle for the most part, reaching a high of 1.4550 before ending the day 16 pips above its opening price at 1.4511. Meanwhile, the euro closed with a 15-pip gain against the yen at 111.47.

Aside from the pick up in risk appetite, news about the two biggest lenders in Greece merging might have helped fuel the euro’s run. Talk around the hood is that EFG Eurobank Ergasias SA and Alpha Bank SA’s decision boosted investor confidence as they form a stronger entity.

However, Italy might have capped the euro’s gains. Yesterday, the government announced a few changes to its austerity plans which included scaling down on charging taxes to high-earners and big balllers. According to its statement, it would instead shifting its focus instead on catching tax evaders. I don’t think the news impressed investors as the move implies that the country would have a harder time reeling in its debt.

Make sure you keep tabs on updates regarding the Italian government’s decision, ayt? I have a feeling it would probably affect the euro’s fate on the charts in the coming days.

Also stay tuned to the reports we have listed on our forex calendar today. Don’t keep your hopes up thought! Looking at the forecasts, it seems like analysts aren’t holding their breaths for any improvement in sentiment.

At 9:00 am GMT, the Business Climate index for the euro zone is anticipated to come in at 0.10 after printing at 0.45 in July. Meanwhile, the Economic Sentiment index for the same month is eyed at 100.2 while the Industrial Sentiment index is seen at -2.0. Lastly, Consumer Sentiment was predicted to print at -16.6.

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The euro’s price action yesterday might not be all about the money, money like Jessie J said, but it was definitely all about the fundies, fundies! The euro got slammed across the board, losing against the yen and the Greenback. Here’s why:

First, the euro zone’s economic index fell for the sixth consecutive time in August, which brought the index reading from 103 down to 98.3, the sharpest fall since December 2008. What’s more, Italy’s bond auctions failed to impress markets with weak demand for Italian bonds evident in the auction. Lastly, Germany’s CPI report also missed expectations with its 0.1% decline in August from its 0.4% rise in July.

Will the euro find any support from the region’s slew of economic data today? Germany’s retail sales is due for release at 6:00 am GMT, followed by the country’s employment figures at 7:55 am GMT. Five minutes later at 8:00 am GMT we’ll get hold at Italy’s unemployment rate, which will be followed by the euro zone’s CPI flash estimate, unemployment rate, and Italy’s CPI reading at 9:00 am GMT.

Whew, that’s a lot to watch out for! Make sure you prepare your trading plans for these reports!

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Ka-pow! Risk aversion got the euro knocked out in yesterday’s trading. EUR/USD ended the day 88 pips below its opening price at 1.4366 while EUR/CHF ended the day a whopping 269 pips down from its opening price at 1.1579.

While reviewing Greece’s financial aid program with the ECB and the IMF, hotshots at the European Commission announced that they are working on something “new” for the country’s balance sheets. Consequently, the announcement got market junkies worried that a third bailout package could be in the works. Yikes!

It also didn’t help that yesterday’s roster of economic reports wasn’t really impressive. Employment reports from all over the euro zone disappointed market expectations. The German unemployment change report printed a decline of only 8,000 for July and missed the forecast by 2,000. Meanwhile, the region’s overall unemployment rate was 0.1% higher than what was anticipated at 10.0%.

On the other hand, euro zone CPI for July came in as expected at 2.5% and Germany’s retail sales report for the same month beat the -1.5% forecast when it printed at 0.0%.

Our forex calendar is blank for high-caliber economic reports from the euro zone today so make sure you’re on your toes for updates on Greece.

We only have Germany’s final GDP report for Q2 2011 at 6:00 am GMT. No revision from the previous reading is anticipated with the forecast still at 0.1%. Then at 8:00 am GMT euro zone’s final manufacturing PMI for August is seen at 49.7.

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Just when you thought the debt worries have faded away… BAM, it hits you right in the gut! The euro bulls received a painful punch in the gut yesterday on renewed concerns on euro zone’s debt crisis. As a result, EUR/USD ended the U.S. trading session 96 pips lower while EUR/JPY was 41 pips lower.

In addition to debt worries, euro zone’s final manufacturing PMI came in worse than expected. It printed a reading of 49.0, lower than both the forecast and the previous month’s figure.

Nothing important on euro zone’s economic cupboard today, but don’t you dare think the euro is going to take a break from all the volatility. At 12:30 pm GMT, the U.S. will release the non-farm payrolls report, which is probably the most-watched report in the forex market.

The market expects it to show a 74,000 gain, lower than last month’s 117,000 increase. If you plan on trading the report, check out Forex Gump’s piece on it for more information!

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looking long term. Germany is most likely going to back out. leaving france on its own to deal with greece and spain. give it a few years and the euro will be no more in my opinion.