Daily Economic Commentary: Euro zone

Trading Discussion News and Economy
613

[I]“Wow.”[/I] That’s really all you can say after seeing the euro’s price action yesterday. For the first time since early in September, EUR/USD traded above the 1.4200 handle. The euro posted a 281-pip gain against the dollar after European Union officials finally announced their rescue package. Will the euro extend its gains today?

So the EU summit was a success after all! After much deliberation, EU officials have finally come to an agreement and announced their much-anticipated plan to deal with Greece and expand the bailout fund.

According to the master plan, private bondholders of Greek debt will have to take on a 50% write-down. What’s good about this is that it will significantly reduce the losses that banks will need to incur. On top of that, the 440 billion EUR firepower of the bailout fund will be increased by 4 to 5 times through leveraging.

Even though the nitty-gritty details of the plan haven’t all been ironed out yet, investors took this as a positive sign because it basically means that we’re one step closer to finally putting this European debt crisis behind us!

Considering the strength of yesterday’s move and the massive improvement in risk appetite, it’s likely that we’ll see more gains ahead for the euro. After all, demand for the shared currency could pick up as European banks bring home funds to comply with new capital requirements.

That’s all for now. Good luck trading today, kids! Let’s end this week with a bang!

614

Not so fast, euro bulls! After rocketing across the board last Thursday, the euro leveled off and even pared some of its gains against its its counterparts last Friday. EUR/USD slipped by 28 pips at 1.4158, while EUR/JPY also edged 45 pips lower at 107.25

The disappointing French consumer spending last Friday and doubts on the European leaders’ latest solution to the region’s debt crisis motivated many euro bulls to take profit on their trades and call it a day.

Let’s see if this week’s economic reports can restore the good vibes for the euro. At 7:00 am GMT today we’ll get hold of Germany’s retail sales figures, followed by Italy’s unemployment rate figures at 9:00 am GMT and the whole euro zone’s CPI flash estimate and unemployment rate at 10:00 am GMT.

France and Italy will be enjoying a bank holiday on Tuesday, but the action will return on Wednesday when Germany releases its unemployment change together with the euro zone’s manufacturing PMI at around 9:00 am GMT.

On Thursday the ECB will take the spotlight at 12:45 pm GMT when it announces its interest rate decision. The center stage will then belong to the new ECB head honcho Mario Draghi when he makes his first ECB press conference at 1:30 pm GMT. Make sure you stay glued to the tube on this one, aight?

The euro will cap the week not only with the G20 meetings, but also the final services PMI at 9:00 am on Friday, which will be followed by the euro zone’s final services PMI at 10:00 am GMT and the German factory orders at 11:00 am GMT.

Don’t forget to place your stop losses when trading these reports, buds!

615

That is not how you wanna start off the week! With the markets locking in once again on the European debt crisis, EUR/USD took a major hit in yesterday’s trading action. Fiber dropped a massive 285 pips to close at 1.3858, completely erasing its gains from late last week.

Risk aversion came back in full force, as it seems that the markets aren’t 100% satisfied from the deal that was struck last week. In addition, Italian, Spanish, and Belgian yields also rose, reflecting the uncertainty in the markets.

In addition, word that Greece will be holding a referendum regarding the debt deal also weighed down the euro. Greece will still have to vote on whether or not they want to accept the deal, with the voting only taking place either later this month or even in December. This doesn’t bode well for the current economic environment, as it will allow widespread uncertainty to linger in the markets.

As for hard data, we got some mixed results yesterday. German retail sales were weaker-than-expected, printing growth of just 0.4% in September, but this was still a nice improvement from the upwardly revised 2.7% figure the month before.

Meanwhile, the euro zone’s unemployment rate ticked higher to 10.2%, which was slightly higher than the projected rate of 10.0%.

The only piece of “good news” was that euro zone flash CPI came in at 3.0%, higher than the projected 2.9%. Higher inflation gives the ECB less room to cut rates, but we’ll have to wait till later this week to see whether this will deter the central bank from giving the euro zone an additional boost.

French and Italian banks are on holiday today, so we may not see as much movement as we’re accustomed to. In any case, seeing as how unpredictable the markets have become, it would be wise to be cautious. Good luck trading today!

616

Boomshakalaka! With risk aversion in full tow, the euro got posterized across the charts in yesterday’s trading action. EUR/USD continued its recent slide, dropping another 150 pips to finish at 1.3703. Meanwhile, EUR/JPY erased its intervention gains, as it closed at 107.40, after trading as high as 111.50 earlier on Monday.

Clearly, the markets are back in risk aversion mode and we can thank the Greeks for all this. As I mentioned yesterday, the Greek government has decided to put the new debt deal to a vote. There is a huge possibility that the deal will be shot down, which could force the IMF and EU to withhold bailout funds. That’s right folks – we might just get a big chunk of Greek bond default coal for Christmas!

Now that it’s Wednesday, could we see a midweek reversal? Things haven’t changed much in the markets, but do take into account that EUR/USD has dropped over 500 pips the past two days alone. Don’t be surprised if we see a small retracement later today.

As for economic news, all we have coming out from the euro zone is German unemployment change figures at 8:55 am GMT. Word is that another 10,000 jobs were added to the Germany economy. This would mark the 10[SUP]th[/SUP] straight time that employment has picked up, which reflects how well the Germany economy is doing.

Aside from that, no other news coming out, but do watch out for any developments regarding the Greek vote, as the markets will surely be focusing on this for the rest of the week.

617

Despite all the trouble that’s brewing in the euro zone, the euro managed to snag a win against the U.S. dollar. Imagine that! EUR/USD closed more than 40 pips up from its 1.3703 open price after reaching a high of 1.3828. EUR/JPY, on the other hand, chalked up a loss as it closed 11 pips down from its 107.40 open. Continue reading to find out what the markets have in store for the euro pairs today.

After suffering a huge selloff the other day, the euro seemed to retrace some of its losses as it sneaked in some gains against the Greenback and managed to temper its decline against the Japanese yen. In fact, the euro hardly reacted to weaker than expected German employment figures, which showed a 10K decrease in hiring for September. That was the complete opposite of the estimated 10K increase in employment!

Looking back, I realized that it was Germany’s first time to post a decrease in employment in more than two years. But the market’s indifference to this disappointing report suggests that bigger problems are brewing. You see, after Greek Prime Minister Papandreou announced that there should be a referendum on the debt proposals, big brothers France and Germany told Greece to take it or leave it. According to French President Sarkozy, Greece won’t receive the next set of bailout funds unless they agree to the EU’s proposals. Oh snap!

Things are really heating up in the euro zone, are they? Don’t forget that the ECB rate decision is scheduled at 12:45 pm GMT today and traders are excited to find out how the new ECB Chairman Mario Draghi will handle the situation. Weak economic data and fiscal troubles in the euro zone seem to be nagging the ECB head for a much needed rate cut, which could trigger yet another euro selloff. Still, some believe that Draghi will postpone cutting rates to December if he decides to wait for more data. Either way, things aren’t looking to bright for the euro pairs!

618

Saved for another day! Despite the drama in the euro region, the euro actually edged higher against most of its counterparts with EUR/USD climbing by 76 pips to 1.3823, while EUR/GBP recovered from an intraday low of .8563 and capped the day at .8617.

Yesterday Greek Prime Minister Papandreou received a beating from his European counterparts when he attempted to defend his call for a referendum on the debt deal presented by the European officials.

A few hours and thousands of mixed tweets later, Papandreou conceded to just get the majority of the Greek lawmakers. The news that the chances of the debt deal being rejected are slimmer boosted the appetite for the euro, which lifted the currency against its counterparts.

Of course, it also didn’t hurt that the ECB cut its interest rates by 25 basis points to 1.25%. In his first interest rate decision press conference, ECB President Mario Draghi also mentioned that the ECB bond-buying will not last for long, and that the program is temporary and limited.

We’ll probably hear more from the European officials as they continue to hash out the details of how they’re going to save the region in the G20 meeting still ongoing today.

But for now, we can trade the economic reports coming out of the region starting with the euro zone’s final services PMI at 9:00 am GMT, followed by the PPI report at 10:00 am GMT. Both reports are expected to come in stronger than its previous figures, but a downside surprise could weigh on the euro.

Good luck in your trading today, kids!

619

Ugh, so much for a comeback! Just when we thought the euro was going to extend its winning streak against the dollar to three days, EUR/USD dropped from its intraday high of 1.3869 to 1.3712. The pair then ended the day 31 pips below its opening price at 1.3792.

What happened? Well, from what I’ve heard, it seems like investors played it safe ahead of the no confidence vote in Greece, moving their money outside of “risky” assets and into the dollar. Of course, it also didn’t help that the roster of reports we saw on Friday disappointed market expectations.

The euro zone services PMI for October came in lower at 46.4 than the 47.2 forecast. Meanwhile, the German factory orders report for September printed a 4.3% decline when it was estimated to post a 0.1% uptick for the month.

With that said, make sure you pay attention to the economic data we have scheduled from the euro zone today.

First up at 9:30 am GMT is the Sentix investor confidence index for November which is eyed at -19.7. Then at 10:00 am GMT, we’ll get dibs on consumer spending for September. The forecast is for the retail sales report to print flat after showing a 0.3% decline in August. Finally, at 11:00 am GMT, the German industrial production report will be released. It has been estimated to come in at -0.7%.

Also make sure you keep an ear out for updates on Greece as it seems like the drama is far from being over. The latest news is that Greek Prime Minister George Papandreou has stepped down. This move could be bearish for the euro as political instability could keep Greece from receiving its next tranche of aid. Yikes!

620

Despite political uncertainty in Greece and Italy, the euro was able to put up a good fight against its major counterparts. It only lost 9 pips to the dollar as EUR/USD traded sideways for most of the day. On the other hand, EUR/CHF gapped up over the weekend and ended 211 pips above last Friday’s closing price. How long can the euro keep this up?

The euro has been surprisingly resilient amid the political drama in Greece and Italy. Greek Prime Minister Papandreou was recently forced to resign and form a unity government, while Italian Prime Minister Berlusconi is coming under pressure to step down as well. In response, Italy’s 10-year bond yields have risen to their highest levels since the euro was born. Yowza!

My buddy Forex Gump recently wrote a nice piece covering the rising political instability in Greece and Italy. I suggest you check it out!

Anyway, it’s clear that Italy now shares the spotlight with Greece in the European debt crisis drama. That being said, I’d keep a close watch on Italy if I were you. If political turmoil persists, it could increase bearish pressure on the euro.

In other news, yesterday’s reports were all in the red!

The Sentix investor confidence report gave a reading of -21.2, which is not only a big drop from the previous month’s record of -18.5, but is also a big disappointment compared to the expected reading of -19.7. Likewise, euro zone retail sales data gave us no reason to smile as it showed a 0.7% drop in sales in September versus the expected 0.0% figure.

Last but not least, Germany continued its streak of bad reports with industrial production slipping 2.7% instead of just 0.7% in September.

We won’t have hard data to work with today, but it would be wise to keep your eyes and ears open as EU finance ministers will be holding ECOFIN meetings later on. They may just make some market-moving revelations and announcements, so be sure to check your Twitter feeds for trending topics yo!

621

Bye bye, Berlusconi? With news that the Italian PM was offering his resignation, the euro danced up the charts, skipping ahead of the dollar. EUR/USD gained 58 pips yesterday, as it closed at 1.3838.

As expected, the Italian Parliament did not pass Berlusconi’s proposed budget plans. This prompted Berlusconi to offer his resignation, but only after the government passes new austerity measures. This helped prop up the euro, as Berlusconi is considered to be one of the major obstacles in implementing stricter austerity measures.

Of course, there’s no telling how sincere Berlusconi really is. Some say this may only be a ploy to buy more time. In addition, take note that Italian yields are still hovering at the 6.71% level, which means that the markets are still cautious over the situation. The higher yields go, the higher the possibility that Italy come knocking on the EU’s door for a bailout.

We have nothing on the economic calendar for today, so for now, it would be best to keep an eye out on the developments in the Italian and Greek situations. This will most likely be the major driver of euro trading today, so be careful trading and stay tuned!

622

The euro experienced a damaging hit across the board yesterday as fear gripped the markets once again. Risk aversion was the result of two events. One was the resignation of Italian Prime Minister Berlusconi and the other was the unexpected rise in Italian bond yields. EUR/USD was sitting at 1.3555 by the end of the U.S. trading session, almost 300 pips lower from its opening price that day.

There were no major economic releases yesterday and today we’ll only see some mid-tier data.

First is the German Final CPI at 8:00 am GMT. No change is expected from the preliminary reading of 0.0%. Following at 8:45 am GMT is the French Industrial Production. It is slated to show a 0.6% decline, opposite the 0.5% increase seen the previous month. And last is the ECB monthly bulletin. It will be released at 9:00 am GMT.

With risk aversion at high levels, I don’t think the upcoming reports will have too much of an effect on price action so focus your attention instead to euro zone debt crisis developments and Italian political problems. More bad news from the region could trigger another euro sell-off.

623

Wooooo! What a day for the euro! After it looked like EUR/USD was going to break past the 1.3500 barrier, it recovered on improved risk appetite and eventually traded to as high as 1.3654. By the end of the day, the pair had closed at 1.3603, up 49 pips on the day.

The euro got a boost from an improved political scene, as former ECB Vice President Lucas Papademos was named as the new Greek Prime Minister. He will be heading the new coalition government until February, when an election will be held for the position. This helped ease some tension in the markets, as it will help Greece obtain much needed bailout funds from the IMF.

We also got some good news from Italy, as the Italian Senate announced that it would rush to vote on new austerity measures tomorrow. In addition, word through the grapevine was that the ECB purchased Italian bonds, which held supress the recent rise in bond yields.

Even with no data coming out today, I think we could see some tricky trading in the markets as traders jump on any news that hits the airwaves. Be careful trading out there and make sure to practice good risk management techniques!

624

Boy, did euro bulls party like it was 2012 on Friday! After dipping slightly below its opening price of 1.3603, EUR/USD rallied all the way up to its intraday high of 1.3796. At the end of the day’s trading, it was at 1.3754, 151 pips above where it opened.

News of the resignation of Italian Prime Minister Silvio Berlusconi and Greek Prime Minister George Papandreou sparked optimism in investors. As [Forex Gump](http://www.babypips.com/blogs/piponomics/greek-and-italian-lawmakers-inspire-risk-rally.html) has pointed out in his blog, the two leaders haven’t convinced markets that they would be able to straighten up the balance sheets of their countries. And so, the news of their exit has allowed investors to breathe a sigh of relief.

I’ve done a little bit of research on the new Greek Prime Minister (who is a former [ECB](http://www.babypips.com/forexpedia/ECB) Vice President) Lucas Papademos and the top contender to replace Berlusconi, Mario Monti. I found out that both men have had their fair share of experience with financial markets and because of this, some analysts are hopeful that the new leaders understand the need to implement [austerity](http://www.babypips.com/forexpedia/Austerity) measures with urgency.

But don’t think that the political drama in Europe has come to an end. Keep an ear out for updates, especially from Italy. Berlusconi has promised that he would step down as soon as the 2012 Budget is passed. If he doesn’t hold on to his word, we may just see the euro get sold off.

Also, make sure you’re on your toes for the EZ industrial production report due to be released later at 10:00 am GMT. It is expected that industrial production contracted by 2.1% in September. If you’re feeling bullish for the euro, keep your fingers crossed for a better-than-expected figure!
625

The euro bulls must’ve had hangovers from their weekend parties, because boy, were they in a bad mood! After pushing the euro aggressively higher last Friday, the euro plunged sharply against its counterparts yesterday. EUR/USD ended up falling by 162 pips at 1.3626, while EUR/JPY also dropped by 137 pips and closed below the 105.00 handle.

With weak economic data and bearish news making its rounds in the euro zone, who wouldn’t want to sell the euro? Italy conducted its monthly bond auctions yesterday, and based on the 14-year high of the yields on the 5-year bonds, the investors aren’t convinced that a new technocratic government for Italy will do the trick.

Italy collected around 3 billion EUR from its 5-year bonds yesterday, which wasn’t that bad if it weren’t for the 6.29% yield that they had to give the investors. The rate is not only a 14-year high for the data, it’s also almost 1% higher than last month’s rate.

The euro zone’s industrial production report didn’t help the euro either. The data declined by 2.0% in September after rising by 1.4% in August, which suggests a slowdown in economic growth for the region.

Will today’s reports provide any relief for the euro? France, Germany, and the euro zone are set to release their GDP numbers at 6:30 am GMT, 7:00 am GMT and 10:00 am GMT, respectively. At 7:45 am GMT we’ll also get hold of France’s non-farm payrolls report, followed by Italy’s trade balance report at 9:00 am GMT. Lastly, we’ll see Germany and the euro zone’s ZEW economic sentiment as well as the region’s trade balance report at 10:00 am GMT.

Any one of these reports have the potential to be a market mover, so make sure you keep your eyes glued to the tube!

626

Mamma mia! Once again, the euro crashed and burned on the charts as concerns over Italy intensified. It gave up 96 pips to the dollar as EUR/USD closed at 1.3530. Meanwhile, against the yen, it lost 74 pips as EUR/JPY ended the day at 104.32.

Italian bond yields soared past the crucial 7% mark again yesterday as investors continued to worry about the future of the boot-shaped country. Reports say that newly-appointed Prime Minister Mario Monti has gone through the process of forming a government in only three days. However, it seems like that wasn’t enough to impress investors. They want to see the austerity measures demanded by EU leaders to be implemented, FAST!

With borrowing costs already reaching unsustainable levels, the near-term risk for Italy, as well as the euro zone, is a credit downgrade. So make sure you keep an ear out for updates from any of the three major credit rating agencies, namely: Moody’s, Fitch, and S&P.

The mixed roster of economic reports that were released from the euro zone provided very little relief to the currency too.

France’s Q3 2011 preliminary GDP came in higher than expected at 0.4% versus the 0.3% consensus. However, its previous reading was revised down to -0.1% from 0.0%. Meanwhile, the EZ and German Q3 2011 GDP reports printed as expected at 0.2% and 0.5%, respectively.

The region’s trade balance report for September also topped forecasts. It came as a pleasant surprise, printing a 2.1 billion EUR trade surplus, after having been predicted to show a deficit of 800 million EUR.

On the not-so-bright side of things, the German ZEW economic sentiment index for November hit its three-year low at -55.2 as the sovereign crisis weighed down on the outlook of investors and analysts. The report disappointed expectations which was for a more modest contraction at -51.8. The EZ version of the report also fell short of forecasts when it printed at -59.1 and missed the -52.7 prediction.

For today, we only have the euro zone’s CPI report for October on tap. At 1:30 pm GMT, the headline figure is anticipated to come in at 3.0%. Meanwhile, excluding volatile items, the core CPI is seen at 1.6%.

Talks are already going around that the ECB might cut rates as the region continues to grapple with the crisis. And so, a better-than-expected CPI report may just be enough reason for the bank to hold off cutting interest rates. So be sure not to miss the report, ayt?

627

Well, there goes the euro again. For the third straight day, the euro lost the battle in the foreign exchange and ends the day lower versus the dollar yesterday. EUR/USD ended the U.S. trading session at 1.3476, 54 pips lower from its opening price that day.

The euro gave way to dollar gains as market sentiment continued to get worse. A news report from Fitch, one of the three major global credit rating agencies, said that there was a risk of contagion from the European debt crisis. As a result, the major U.S. equity indices, as well as high-yielding and risk-related currencies, took a major dive.

In other news, euro zone data came in as expected. The region’s CPI showed a 3.0% increase while the core version of the report revealed a 1.6% rise.

No major report scheduled for release today but I think we’ll still see the euro experience a lot of volatility, especially since contagion fears have not abated yet. With risk aversion still strong, we could see the euro get sold-off across the board again.

628

EUR/USD must have gotten exhausted from all that diving as it decided to cruise sideways yesterday. The pair found support at the 1.3450 area and resistance near 1.3530. EUR/JPY also tried to refrain from dropping any further as it held on to support at 103.50.

Yesterday’s bond auctions revealed that investors were feeling iffy about holding Spanish bonds. Yields on Spain’s 10-year bonds reached 6.97%, which was just a few notches close to the 7% threshold for bailouts. With that, most market participants speculated that Spain could get slapped with a downgrade from any or all of the credit rating agencies. If that happens, euro pairs could break out from their current ranges and resume their declines. Yipes!

As for economic data, the euro zone didn’t release any major reports yesterday as traders focused their attention on the bond auctions. Today, Germany is set to report its PPI figure for October and print a 0.1% uptick in producer price levels. Stronger than expected PPI could give the euro pairs a slight boost, but traders might be more interested in ECB President Mario Draghi’s speech at 8:00 am GMT. Bear in mind that almost everyone is waiting for the ECB to do something about the worsening debt crisis in the region, and many are hoping that the new ECB head could come up with a promising solution. Keep those eyes and ears peeled for updates!

629

Well, well, well, it appears the euro bulls have finally come out of hiding last Friday. EUR/USD, which began the day at 1.3467, rose as high as 1.3616 before closing the U.S. trading session at 1.3516.

According to various news reports, the aggressive of bonds in the Italian and Spanish markets was the likely cause of the euro’s rally. Economic data that came out was also better than expected. The German PPI showed a 0.2% rise, slightly higher than the 0.1% increase initially predicted. Both of these events managed to boost market sentiment, which helped the euro rally.

I’m not too convinced though. At the end of the day, euro zone’s problems are still there and nothign has really changed. The move last Friday could simply be a “short squeeze” as traders cover their short EUR/USD positions.

This week, euro zone’s economic calendar is relatively light. Today, the current account balance is due. It is slated to show a 3.2 billion EUR deficit, a huge improvement from last month’s 5.0 billion EUR deficit.

On Wednesday, we’ll be treated to a bunch of PMIs. The market expects the readings to fall, especially with all the political and debt problems facing euro zone. The Flash Manufacturing PMI is predicted to print a reading of 46.6 from 47.1 last month while the Flash Services PMI is predicted to fall to 46.1 from 46.4.

The last red flag event, the German Ifo Business Climate survey, will come on Thursday. It is expected to also decline to 105.5 from 106.4 last month.

630

Hang in there, fellas! Despite the onslaught of bearish news from the euro region yesterday, the euro managed to pare some of its losses against its major counterparts. EUR/USD held steady at 1.3502 after dropping to an intraday low of 1.3430, while EUR/GBP shot up by 77 pips to .8627.

Do you think yesterday’s current account report had anything to do with it? Yesterday the data showed that the difference between the value of imported and exported goods is at a 500 million EUR surplus in September, which is a lot higher than the 5.9 billion EUR current account deficit we saw in August.

Before you buy the euro like crazy though, you should also take note of the bearish news that have been making the euro bulls as skittish as a cat on hot bricks.

For one, word on the hood is that Moody’s is getting ready to do some damage on France’s precious AAA credit rating. What’s more, the ECB still hasn’t stepped up its game in helping lift the sentiment for the euro by committing to more bond purchases.

Today we’ll only get to see the region’s consumer confidence report at 3:00 pm GMT. The data is expected to retain its -20 reading for October, but a higher number might give the euro a boost. Of course, you probably don’t need me to tell ya that you should also be watching for any developments in the euro zone debt crisis!

631

The euro’s still chillin’ like ice cream fillin’! Despite news that the IMF plans to extend its credit line to Europe, the shared currency refused to budge and remained range-bound against its major counterparts. Both EUR/USD and EUR/JPY ended just 10 pips higher on the day as they stayed within their 5-day ranges. Talk about consistency!

The only thing that kept the newswires buzzing yesterday was news that the IMF approved new lending tools to help keep the European debt crisis from escalating. Basically, it will now allow economically strong countries to borrow up to ten times their contributions to the IMF to help foot their bills. This new 6-month credit line was designed to replace the current credit line and help solve the euro zone’s liquidity problems.

Considering that the IMF’s current lending capacity stands at 400 billion USD, this credit line probably won’t be enough to shore up economic giants like Spain and Italy. But at this point in time, the euro zone needs all the help it can get! That being said, this new tool will probably be tapped by smaller cash-strapped nations such as Portugal and Hungary.

In other news, economic forecasts were right on the money when they predicted that the euro zone’s consumer confidence index would print a reading of -20 again. This just goes to show that our bros up in Europe aren’t taking the idea of more belt-tightening measures very well! And to think, the holidays are right around the corner. If confidence continues to slouch, it could take a toll on holiday consumer spending. Ouch!

Today, we’ve got a set of euro zone PMI reports coming out, all of which are expected to print lower figures. France will start off at 8:00 am GMT, releasing its manufacturing and services PMIs. After that, Germany will follow up with its own manufacturing and services reports at 8:30 am GMT. And to round it all up at 9:00 am GMT, we’ll take a look at the euro zone’s PMIs.

Also, at 10:00 am GMT, we’ll take a look at industrial new orders data. Look for orders to slide by 2.4% in September, following the 1.9% uptick in August.

Stay alert today, homies! If these reports print large downside surprises, it could result in a sharp sell-off that could end EUR/USD’s and EUR/JPY’s 5-day ranges!

632

The euro bears just couldn’t resist going out with a bang, couldn’t they? Just before the U.S. traders packed up to make their favorite Turkey Day stuffing recipe, the euro experienced a sharp selloff across the board. EUR/USD, for example, took out stops below 1.3400 and ended the day with a 1% drop at 1.3337. What the heck happened?

Apparently, the results of Germany’s bund auctions have a lot to do with the selloff. Germany’s 10-year bonds worth 6 billion EUR only received a bid of 3.9 billion EUR, signaling that investors are staying away from European debt altogether and not just the bonds of peripheral euro zone economies.

Of course, it didn’t help the euro that France’s economy is also in hot water. Aside from French President Sarkozy hinting at a beginning of a liquidity run in the euro zone, France’s 10-year bond yields also shot up to 3.69% from 3.53% yesterday. If you recall, credit rating agency Moody’s has already warned that France’s AAA credit rating might take a hit if borrowing costs for the country continue to inch higher.

Even the region’s economic data weren’t any help to the euro bulls. Manufacturing and services PMI from France, Germany, and the euro zone were generally mixed, with France’s services PMI climbing from 44.6 to 44.9 in November while Germany’s manufacturing PMI fell from 49.1 to 47.9 in the same month. Meanwhile, the euro zone’s industrial new orders showed a 6.4% decline in September after rising by 1.4% in August.

Today Germany and Belgium will take center stage with their economic reports. Germany will publish its final GDP numbers at 7:00 am GMT, followed by its Ifo business climate report at 9:00 am GMT. Then, at 2:00 pm GMT Beligium will release its NBB business climate for the month of November.

Oh, and don’t forget to watch the newswires, will ya? You’ll never know when the other market-moving events suddenly inspire spikes in your favorite pairs!