Daily Economic Commentary: Euro zone

Trading Discussion News and Economy
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We got mixed results from the euro last Friday. While it came out on top and earned 115 pips in its battle against the dollar, it marked its second straight loss against the yen and lost 12 pips. What can we expect from it today?

We didn’t really have any hard stats to work with last Friday, but nevertheless, traders had plenty to think about.

For one, EU Commissioner Rehn was spreading rumors that Greece and its creditors were close to finalizing a deal and that things would be ironed out by the weekend. Right now, we’re still waiting for solid confirmation that they’ve reached an agreement. Multiple sources say that a deal is definitely in the works, and many say it might be announced by today’s summit.

What summit, you ask? I’m talking about the EU summit today, of course! Many are expecting big announcements from the first summit of the year. Investors want to see what sort of safety mechanism EU leaders have in mind, but many believe they’ll be focusing on economic growth. I was talking to some of my homeboys and they said that they believe some funds may be used to generate jobs and finance small businesses.

Though the summit probably won’t focus on Greek debt issues in particular, it could serve as a prime venue for big announcements, so be sure to stay on your toes today, fellas!

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Was that a drive-by shooting we just witnessed? With risk aversion coming back in force, the euro got killed in yesterday’s trading action. EUR/USD dropped a solid 100 pips to finish at 1.3130, while EUR/JPY closed at 100.24, down 120 pips from its opening price.

So who was the culprit this time around? No other than our fabulous European leaders!

No progress was made at the EU summit, as European leaders failed to come up with solutions to handle Greece’s ongoing debt problems. It seems as if European leaders are content to wait until Greek officials succumb to market pressure and accept the harsh deals that private bondholders have currently put on the table.

With the lack of any new developments, the markets were largely disappointed, and this helped the euro tumbled across the charts.

There was one bit of good news yesterday though, as Italian bond auctions did relatively well. Italy was able to sell 7.5 billion EUR worth of bonds, which was near their maximum target. Lately, bond auctions have done relatively well, despite all the concerns about a potential Greek default and the effects of contagion. I suggest keeping tabs on the bond auctions, as a rise in yields or the lack of participation may be an early signal of more troubling times to come.

For today, we’ve got German retail sales and the German unemployment change reports coming out at 7:00 am GMT and 8:55 am GMT respectively. Retail sales growth for the past month is expected to print at 0.9%, while another 8,000 jobs are expected to have been added to the German economy last December. If these reports print much better-than-expected, it could give the euro the boost it needs to erase some of yesterday’s losses.

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Red was the color of the day yesterday as most economic reports released from all over the globe failed to meet expectations. Because of this, EUR/USD was hit hard by risk aversion and posted its second straight day of losses. The pair closed the U.S. trading session at 1.3080, 50 pips lower from its opening price that day.

In euro zone, the German retail sales report came in with a 1.4% decline, much worse than the 0.9% decrease initially expected. Meanwhile, the French consumer spending report showed a 0.7% fall, opposite the 0.3% increase forecast.

The only “good” news that was published from the region was the German unemployment change. It showed that the number of unemployed people fell by 34,000, much higher than the 8,000 figure consensus.

Today, the only major report that will be released from euro zone is the flash consumer price index estimate. The market is expecting a 2.7% rate year-on-year, which is slightly lower than the previous month’s 2.8%. The actual figure will print at 10:00 am GMT.

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[I]“Up, up, here we go, go[/I]!” With an abundance of risk appetite to fuel its jet packs, the euro flew up the charts, gaining against the dollar and the yen. EUR/USD closed at 1.3152, up 72 pips from its opening price, while EUR/JPY finished at 100.25, posting a 52 pip gain on the day.

The only piece of “hard” data that was released yesterday was CPI flash estimate. As expected, the figure printed at 2.7% year-on-year, which is near the high end of the ECB’s target. Still, this release didn’t have too much of an effect on euro trading.

So what caused the euro’s swagger yesterday?

First, we saw better-than-expected Chinese PMI manufacturing figures, as it printed at 50.5 (expectations were at 49.6). This means that instead of shrinking slightly, Chinese manufacturing industries are expected to grow a little bit in the near future. This boosted risk-taking in the markets, as it lessens the chance of an economic slowdown this year.

Second, European bond auctions went fairly well yesterday, as Italian, Spanish, and Portuguese yields all dropped. Portugal was able to sell 1.5 billion EUR worth of bonds, with 3 month bill yields coming in at 4.068% (down from 4.346% in the previous auction), while 10-year bond yields printed at 14%, which was way below the 16.58% high.

Thirdly, it seems that we’re actually seeing some optimism out of the Greek debt deal talks, as Greek Finance Minister Venizelos is just “one step away” from working out a deal with private bondholders. Well, the truth is, they are running out of time, so any sign of progress would probably be taken as a positive!

Adding these all together, and it was a rather good day to be a euro bull. Congrats to those of you who bagged some pips. To those of you who were less foruntate… there’s always today!

No hard data lined up today, but as we saw yesterday, its all about risk sentiment baby! Keep an eye out for any developments regarding the Greek debt situation, as well as signs of life from the equity markets. If we continue to hear more good news, it may be time to hop on that long euro bandwagon!

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Despite it being already the month of love, the euro didn’t get any lovin’ from traders in yesterday’s trading. EUR/USD failed to trade past the 1.3200 handle and dropped to an intraday low of 1.3085. The shared currency was able to pare some of its losses during the New York session but it still fell short of a win by 7 pips, closing at 1.3145.

The lack of any significant new developments in the euro zone and the absence of economic data might have turned off investors from buying the euro yesterday.

Greece is still negotiating with its private creditors for a debt deal. Meanwhile, German Chancellor Angela Merkel tried to convince China yesterday to invest in the EFSF, saying that the country (as well as everyone else) will want the debt crisis to be solved. Chinese Premier Wen Jiabao seems open to the idea but we’ll have to wait and see if China does in fact keep its promise.

As for economic data, we only had the PPI report for December which showed that producer prices declined by 0.2% in the region. But don’t fret! Perhaps the reports we have today will be able to boost the euro. (That is, if they come in better-than-expected.)

At 9:00 am GMT, the euro zone final services PMI for January will be released and it is expected to match its previous reading at 50.5. Then at 10:00 am GMT, the retail sales report for December will be on tap. Consumer spending is seen to have increased during the month by 0.4%.

Other than that, be sure you also keep tabs on the much-anticipated NFP report from the U.S. as it would most probably affect the price action on EUR/USD. Check out Forex Gump’s article to better anticipate the report. Good luck!

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With risk appetite dominating the markets, who needs to watch the Super Bowl to see some action? Okay, maybe it’s not as exciting as watching The Big Game, but the euro managed to lock in some pips thanks to a positive jobs report in the U.S. EUR/USD traded on a 100-pip range before ending the day at its open price, but EUR/JPY rose by 47 pips to 100.34.

Aside from rescheduling a couple of Greece-related meetings to later this week instead of Monday, the euro zone also provided mixed reports last Friday. The region’s final services PMI slipped a bit to 50.4 from its 50.5 reading, while its retail sales fell by another 0.4% in December.

Of course, the kicker in the euro’s strength was the positive NFP report released from the U.S. Don’t believe me? Read all about it in my USD write up!

Let’s see if the euro can get any support from this week’s economic reports. The week will start off with the Sentix investor confidence report at 9:30 am GMT and Germany factory orders data at 11:00 am GMT, but it will be followed by other big reports like the German industrial production report tomorrow at 11:00 am GMT; the ECB interest rate decision on Thursday at 12:45 pm GMT, and the ECB press conference at 1:00 pm GMT.

Good luck in your trading this week!

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Boy, does the euro know how to stage a comeback! The currency traded lower for the most part of the day with EUR/USD tumbling to its intraday low of 1.3028 after opening at 1.3120. However, the euro started to rally during the New York session and closed the day with an 11-pip gain at 1.3131.

Greece still hasn’t come into terms with its creditors regarding a debt deal and I have a good feeling that this weighed heavily on the euro yesterday. But with the currency still trading near its highs implies that investors have high hopes that officials will come up with a last minute agreement. Of course, it may have also helped the currency that the reports released from the euro zone yesterday came in better than expected.

The Sentix Investor Confidence index fore February came in at -11.1, a more modest decline than the -14.8 reading that markets were eyeing. Germany’s factory orders for December also topped expectations for a 0.7% uptick when it printed at 1.7% and erased part of its 4.9% decline in November.

With that said, you may want to keep tabs on the German industrial production report due later today at 11:00 am GMT. It is expected that the value of output produced by the industrial sector contracted by 0.1% in December 2011. A figure better than the forecast may give the euro its much-needed support to stay above 1.3000, at least for today’s trading.

Also be sure to keep an ear out for updates regarding Greece. From what I’ve heard, it seems like a few market junkies are expecting the government to announce a default soon. Yikes!

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I’ve got to hand it to the bulls – any time they hear optimistic news regarding the Greek debt deal, they would immediately show support for the euro. EUR/USD closed the U.S. trading session at 1.3253, a solid 121 pips higher from its opening price that day.

The “good” news came from Euro Group leader Jean-Claude Juncker. He went on the wires saying that Greece cannot be forced out of the euro zone, and on the unlikely occurrence that Greece exits, the costs associated with it would be too great.

Juncker’s statement echoes that of German Chancellor Angela Merkel’s, where she says that a Greek default is unacceptable. There was also rumors that went around that Greek officials are creating a final draft of the debt deal.

Economic data disappointed though. The German Industrial Production report came in with a 2.9% decrease, significantly worse than the 0.1% decline initially anticipated.

The only event scheduled on euro zone’s economic calendar today is the release of the German Trade Balance. It is slated to print a 14.1 billion EUR surplus, which is slightly lower than the 15.1 billion EUR surplus seen the previous month. A falling trade balance is normally considered bearish for the euro.

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Wow, talk about some consolidation going on! The euro barely budged against the U.S dollar yesterday as EUR/USD was stuck around the 1.3250 area. Meanwhile, EUR/JPY was able to edge a bit higher as it closed 35 pips up from its 101.75 open price.

There weren’t any major economic releases from the euro zone yesterday, as euro pairs moved cautiously ahead of today’s ECB rate decision. Also, euro traders are awaiting the approval of Greece’s austerity measures to see whether the government could finally secure the debt deal and receive more bailout funds. Another issue up for discussion is whether the ECB would be willing to sell its Greek bond holdings at a lower price or not.

Make sure you keep an eye out for the ECB rate statement at 12:45 pm GMT today. The central bank is expected to keep rates on hold at 1.00% and highlight the bright spots we’ve been seeing in the euro zone economy recently. If ECB head Draghi sounds a tad more optimistic than he did in their previous rate statement, the euro could break out of consolidation and push for new highs.

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For the second straight day, EUR/USD was unable to pick a direction. In fact, it was so directionless that it practically didn’t move all day! It simple traded within a tight range and bounced between resistance at 1.3320 and support at 1.3215.

The European Central Bank (ECB)'s rate announcement failed to make an impact on the pair because it pretty much came in line with forecast. As expected, the ECB choose to keep rates unchanged at 1.00% and took a “wait-and-see” approach.

Today, there are a couple of low-tier economic reports that will come out. At 7:00 am GMT, the German Final CPI will print. It is expected to confirm the preliminary figure of -0.4%.

Following at 7:45 am GMT is the French Industrial production report. The report is slated to show a 0.8% decrease, opposite the 1.1% increase seen the previous month. Falling industrial production is usually considered bearish for the euro.

As you can see, market moving events will be scarce today, so don’t hold your breathe for a lot of movement! Keep a close eye instead on previous day highs and lows, as they might serve as today’s inflection points.

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We have always believed that news about Greece would set the tone for the euro’s intraweek price action, and last Friday is proof of it. The euro fell against its major counterparts, with EUR/USD plunging by 112 pips while EUR/JPY also slipped back by 95 pips to 102.26.

The euro zone finance ministers started triggered the euro’s decline when they asked for additional measures before they agreed to sign Greece’s 130-billion EUR additional bailout money. After that, Greece’s far-right party leader said that he refused to back the new measures. His refusal suggested that a deal won’t be reached by the end of the week, increasing possibilities of a default and maybe even contagion. Yikes!

Let’s see if the good vibes from the early Asian session will tickle the euro bulls’ fancy. A couple of hours ago Greek Prime Minister Lucas Papademos won the approval of the Parliament in a 199-74 vote to implement additional austerity measures despite the violent protests going on just outside their building.

The euro initially spiked at the release of the report, but it looks like it’s losing steam fast. How will it play out for the rest of the day? Only Germany’s wholesale price index at 7:00 am GMT is scheduled for release today, so you better watch your charts closely for any signs of a reversal!

Also due this week is the German ZEW economic sentiment report tomorrow at 10:00 am GMT, a couple of GDP reports from France, Italy, and Germany on Wednesday, and the ECB monthly bulletin on Thursday at 9:00 am GMT. Of course, you must also keep close tabs on developments about Greece!

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Just when it seemed like the euro was going to deliver another stellar performance on the charts, it reversed its course and erased all its gains! EUR/USD began the week on a strong note as it gapped up 37 pips over the weekend and rallied to a high of 1.3285. However, it decided to make a U-turn midday and headed down the charts to close at 1.3191, 19 pips below its opening price.

Way to break a lot of hearts right before Valentine’s Day, eh? The big news over the weekend was the Greek parliament’s decision to pass a new set of austerity measures. Though the move was widely protested (people took to the streets yo!), Greek officials felt that it was absolutely necessary to pass the package in order to avoid default and obtain its second bailout.

Remember, Greece has a 14.5 billion EUR bond repayment due on March 20, so it needs to get its hands on some moolah quickly!

In other news, Moody’s recently downgraded debt ratings of 6 European countries (Italy, Malta, Portugal, Slovakia, Slovenia, and Spain)! Even the U.K., France, and Austria weren’t spared as their credit outlooks were lowered to negative status. Yowza! No wonder market confidence is low!

Up ahead, the major economic releases to keep an eye out for are the ZEW surveys due at 10:00 am GMT. Both the German and the euro zone-wide versions of the report are expected to print improvements, though the indexes will likely stay in the negative zone. At the same time, industrial production data will be available. Look for production to slide 1.1%.

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Whoever warned about not counting chickens before they hatched sure didn’t warn the euro bulls! Thanks to weak economic data and renewed concerns over a possible Greek default, the common currency dropped back down against its counterparts.

EUR/USD slid by 71 pips to 1.3120, while EUR/CHF also ended the day 11 pips down from its open price at 1.2076.

As it turned out, getting finance ministers from the euro region to agree on a bailout requires much more than saying “aye” to a few austerity measures. What spooked investors yesterday was that the so-called “euro working group” composed of 17 finance ministers from the euro region surprisingly delayed their meeting, which implied that Greece might have to wait some more before receiving the much-needed additional bailout money.

Of course, it didn’t help that reports from the region printed with mixed results. Though Germany’s ZEW report rocketed to the optimism territory with its 5.4 reading in February and the euro zone’s own ZEW data clocked in at a better-than-expected -8.1 reading, the region’s industrial production report disappointed markets with a 1.1% decline in December. Meanwhile, France’s quarterly payrolls report also showed a 0.2% drop when analysts were actually expecting a 0.2% rise.

Aside from the quarterly French, German, and Italian GDP numbers as well as the euro zone’s trade balance report scheduled between 6:30 am to 10:00 am GMT today, also keep an eye out for the “euro working group” meeting also scheduled today.

Word on the hood is that finance ministers have at least half a dozen more demands in order to approve of Greece’s new bailout. If any statement made today suggests that Greece might not get more moolah soon, then we might see more euro weakness in the charts!

Keep your head in the game, will ya?

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Knocked o-ver! Just when the euro thought that a victory was in sight, it got quite a beating from its major counterparts. EUR/USD opened at 1.3067, reached a high of 1.3192, before plummeting to a low of 1.3044. EUR/JPY also ended the day in the red as it closed 50 pips down from its 102.90 open price.

China’s promise to extend its support to help solve the euro zone debt crisis got the euro’s hopes up during the Asian session. Remember when China hinted that they MAY participate in the EFSF a few weeks ago? Well, our boys over at the land of dimsum and pandas expressed more determination to resolve the crisis by changing their wording and announcing that they WILL provide aid. Now that’s promising!

However, the euro rally that was spurred by this announcement quickly reversed during the first few hours of the London session when Eurogroup head Jean-Claude Juncker reminded Greece that the release of the bailout funds still wasn’t guaranteed. Bear in mind that, as Forex Gump discussed in his article about what you need to know about the Greek debt deal, euro zone finance ministers still haven’t made a decision on whether the next tranche of funds will be released or not, and that the deadline of Greece’s debt obligations is fast-approaching. Juncker did mention that they will make their decision by February 20, so sit tight!

As for economic data, the recent GDP reports from the euro zone showed that Germany and Italy both contracted during Q4 2011 while France printed 0.2% growth. Overall, the region contracted by 0.3% during the quarter, prompting several market participants to worry that the dreaded double-dip could be waiting in the wings. It didn’t help that the previous quarter’s figure was revised from 0.2% down to 0.1%, reflecting weaker than expected growth.

Today, only the ECB monthly bulletin and the Italian trade balance are on the euro zone’s agenda. Both reports aren’t expected to make huge waves across the charts as traders are still zoned in on the developments in the Greek debt situation. Stay on your toes for any updates!

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Now that’s what I’m talking about! On the strength of risk appetite, the euro went on a nice roll yesterday, posting huge gains versus the dollar and yen. After testing just below the 1.3000, EUR/USD managed to climb higher during the latter session and eventually closed at 1.3137. Meanwhile, EUR/JPY finished at 103.68, up 128 pips from its opening price.

Aside from good data across the globe, the euro benefitted from news on the homefront.

First, we saw somewhat successful French and Spanish bond auctions. Market playas bought up those bonds like they were European supermodels! This was taken as a signal that people are willing to hold on to French and Spanish bonds, despite the threat of contagion or downgrades down the road.

Second, we received word that the ECB may be stepping up its game with regards to its bond purchases. Word is that the central bank will be swapping its current holdings of Greek bonds for new bonds, but in the process, will also be transferring any profits it may have made to European governments. In turn, those proceeds may be used to fund another bailout for Greece. Not a shabby plan eh? We should hear more about this on Monday, so hang tight.

For today, we’ve got the German PPI coming in at 7:00 am GMT. Word is that producers paid 0.4% more for their goods last month. Then, later on at 9:00 am GMT, current account figures will be released. Expectations are for a trade surplus of 2.3 billion EUR for the month of December.

To be honest, I don’t expect these reports to set the tone for trading today. In fact, with a decision regarding the Greek debt deal set to be made by Monday, we may just see more consolidation to end the week. In any case, good luck trading and enjoy the weekend homies!

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What a finish by the euro! EUR/USD had one of its rollercoaster weeks as it dipped 26 pips below the 1.3000 handle then rallied for the last couple of days to close at 1.3156. EUR/JPY had its share of ups and downs as it bounced between 102.00 and 103.00 before breaking higher and ending at 104.58.

Euro zone reports released last Friday came in mixed as German PPI beat expectations at 0.6% while the current account balance fell short and showed a mere 2.0 billion EUR surplus. What kept the euro afloat against its major counterparts was the increased optimism surrounding the Greek debt deal as the ECB edged closer to swapping its existing Greek bond holdings for new bonds. Although the central bank hasn’t announced the details of this potential swap deal, most market participants interpreted this as a sign that Greece would eventually have an easier time paying off its debt obligations.

Traders are also on their toes awaiting the Greek Parliament’s decision on debt restructuring, which concerns the rest of Greece’s bond holders. Dubbed as the Collective Action Clause, the proposed legislation could force private bondholders to forego their profits on their debt holdings.

As for economic data, the red flags on euro zone’s calendar include the German and French services and manufacturing PMI due on Wednesday and the German IFO business climate figure due Thursday. Other than those potentially high-impact releases, the coast is clear for the euro zone, which means that traders will probably focus on the developments in the Greek debt situation. Stay on your toes for any updates!

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Risk appetite had traders chompin’ on pips yesterday as a broad-based risk rally drove the euro up the charts. You could practically hear them say “Nom nom nom!” as EUR/USD finished at 1.3237, up 81 pips from last Friday’s close!

There were two main factors behind yesterday’s risk rally. First was the 50 basis point cut in China’s required reserve ratio. And secondly, markets were hopeful that European finance ministers would finally agree on conditions for another loan for Greece.

This time around, it was German finance minister Wolfgang Schäuble who lifted confidence in Europe as he voiced hope that a second package for Greece will be approved. Those are quite reassuring words coming from someone who’s been putting a lot of pressure on Greece in recent weeks!

Today marks the beginning of the ECOFIN meetings, so it’s best that you stay on your toes and stay alert for any major announcements. Good luck, homies!

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A Greek debt deal has finally been announced! But unlike Katy Perry, the news failed to launch fireworks for the euro and make it own the charts like the 4th of July. EUR/USD dropped from its intraday high of 1.3294 and closed the day only 4 pips above its opening price at 1.3241.

Why didn’t the euro skyrocket? Was the debt deal not good enough? Err, Greece actually received a pretty good aid package with the EU providing it with another 130 billion EUR. However, it looks like markets are skeptical if the country could actually fulfill its obligations and convince investors to take a haircut of 52.5% (only 50% was previously agreed).

There is still a lot of uncertainty surrounding debt-ridden country and whether or not it would default. So until we get more insights about how Greece would fare in the coming months, the euro will most probably remain vulnerable to sentiment. However, until we get some market-moving updates about the country, I think we should be on our toes for the reports we have on tap from the euro zone as they would probably affect the currency’s fate on the charts, at least in today’s trading.

At 8:00 am GMT, France will release its PMI reports with its figure for manufacturing for February seen at 49.1 and its services PMI eyed at 52.3. Germany will then take its turn at 8:30 am GMT. Its manufacturing PMI is anticipated at 51.6 and its services PMI is predicted at 53.8. Come 9:00 am GMT, the euro zone-wide manufacturing PMI is estimated to come in at 49.4 while the consensus for the services PMI is at 50.7.

At 10:00 am GMT, the forecast for industrial new orders received in December 2011 is a 0.6% growth and is expected to erase part of the 1.2% loss it scored the month prior.

So if you’re looking to buy the euro today, you may want to keep your fingers crossed for these reports to come in better than expected!

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This is starting to get boring! For the second day in a row, the euro ended virtually unchanged against the dollar as EUR/USD finished 3 pips higher at 1.3244.

You’d think that the euro would get a move on after the PMI reports were released yesterday, but apparently, the markets had other things in mind! Though none of the manufacturing and services PMIs from France, Germany, and the euro zone as a whole matched forecasts, it failed to have a lasting effect on EUR/USD.

Then again, that might’ve been all for the best considering that all of the reports, save for the French manufacturing PMI, fell short of expectations! As a whole, the euro zone’s manufacturing PMI rose from 48.8 to 49.0, which is technically an improvement, but isn’t quite as upbeat as the 49.4 figure that many were expecting to see. Meanwhile, its services PMI slipped from 50.4 to 49.4 instead of rising to 50.7. Bummer! No wonder I heard a lot of fellow analysts reviving talks of recession!

As if that weren’t enough bad news, Fitch also announced yesterday that it decided to downgrade Greece’s sovereign debt rating from CCC to C, saying that a Greek default is “highly likely in the near term.”

The only silver lining was the industrial new orders report, which revealed a 1.9% surge in new purchase orders in December to beat forecasts which called for a lame 0.6% rise. This kind of growth is exactly what you want to see after the previous month’s 1.1% slide.

Today, we only have the German IFO business climate report on tap, and survey says the index will rise from 108.3 to 108.7. Look for the euro to strengthen if results exceed expectations, as this is one of the most important German reports. Good luck, and may the pips be with you!

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Up, up, here we go! Despite the looming possibility of a Greek default, EUR/USD surged past the 1.3300 handle and closed at 1.3372 yesterday. EUR/JPY also had its share of gains as it rallied from its 106.35 open price to end 11 pips shy of the 107.00 handle. What’s keeping the euro up these days?

Better than expected German Ifo business climate data for February gave the euro a strong boost yesterday as the index climbed from 108.3 to 109.6, outpacing the consensus at 108.7. This means that businessmen in euro zone’s largest economy are very optimistic with their outlook for the region.

However, what’s interesting to note is that the increasing likelihood of a Greek default doesn’t seem to be weighing on the euro at all! Are traders simply in denial? Or have they already priced in this event? By the looks of it, private bond holders don’t seem open to the idea of foregoing their profits on their holdings. Not even Greek Finance Minister Venizelos is confident that they could avoid a default!

Only the German GDP and Italian retail sales are on tap for today, and these events aren’t likely to have a huge impact on the euro. With that, y’all better keep your eyes and ears peeled for any updates from Greece because their bailout drama is what’s currently driving risk sentiment these days. Stay on your toes!