Daily Economic Commentary: Euro zone

Trading Discussion News and Economy
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With risk appetite up, the euro became hotter than the south of Spain in Friday’s trading. The shared currency traded higher against most of its counterparts, with EUR/JPY up 24 pips for the day and EUR/USD closing 69 pips above its opening price at 1.3270.

There weren’t any market-moving reports from the euro zone on Friday. This leads many to believe that the euro was able to rally thanks to the pullback in bond yields. Remember that the currency got sold off earlier on in the week as Spanish and Italian bond yields trickled higher, signaling that investors are jittery about the financial situations of the two countries.

With that said, be sure to keep tabs on bonds. A lot of market junkies think that the euro will take its cue from bond yields this week as well.

On top of that, be sure you’re also on your toes for economic reports coming from the region. Keep in mind that part of the reason why the euro got sold off last week was because of disappointing data from the euro zone. So don’t miss the German Ifo Business Climate index due later at 9:00 am GMT which is eyed to come in at 109.7.

A better-than-expected figure may just spur the euro into a rally so watch out!

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Looks like the euro bulls aren’t done partying just yet! Thanks to a surprisingly strong German data and a rally in risk appetite, the euro was able to post more gains against its counterparts yesterday. EUR/USD rocketed from a low of 1.3192 to its 1.3359 closing price, while EUR/JPY posted a 126-pip gain at 110.62.

The German business Ifo climate report got the ball rollin’ yesterday when it printed a 109.8 reading for the month of March. Okay, its increase from February’s 109.7 figure isn’t too impressive, but it was enough to impress traders who were betting that German businessmen would be more pessimistic in March.

Big Ben Bernanke fueled the euro bulls’ fire when he hinted that the Fed would remain accommodative longer than analysts believed. His dovish comments spooked many dollar bulls, which turned out positive not only for the euro but also for the other high-yielding currencies.

Will the euro bulls get excited enough to push EUR/USD above 1.3400 today? At 7:00 am GMT we’ll see the GfK German consumer climate come out together with the German import prices. Germany’s consumer climate is expected to improve in March, while the import prices is projected to drop slightly in February.

Make sure you keep close tabs on bond yields too, aight? I hear that Spanish bond yields finally let up a little yesterday. If euro zone bond yields continue to edge lower today, then we might see more euro-buying in our charts!

Peace out, homies!

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It seems like euro bulls took a breather yesterday after their strong rally on Monday. EUR/JPY ended the day almost unchanged at 110.75 after opening at 110.62. Meanwhile, EUR/USD closed with a 38-pip loss at 1.3321.

We didn’t get any market-moving reports for the euro. However, we did have a few tidbits of both good and bad news yesterday.

On the not-so-good side of things, Spanish bond yields crept higher following an upward revision to the country’s 2012 deficit target from 4.4% to 5.3% of its 2012 GDP. 6-month Spanish Treasury bond yields were up at 0.836% after the auction yesterday from 0.764% in February.

The GfK German Consumer Climate index for March might have also weighed on the euro, disappointing the 6.2 forecast when it printed at 5.9.

Fortunately for the shared currency, there were also positive news from the region that limited its losses. Portuguese bond yields, unlike Spain’s, declined to a full percent since the start of March. Word around the hood is that speculations about an increase in the size of the EFSF and ESM have somehow calmed investors and kept bond yields down.

However, we’d have to wait until after the Euro zone finance ministers meeting this weekend to confirm the rumors.

Until then, be sure you keep tabs on reports from the region. Today, we have the money supply report at 8:00 am GMT. An increase of 2.5% is expected in the total amount of euros in circulation. Then at 12:00 pm GMT, the German preliminary CPI report for March is eyed at 0.3%.

Better-than-expected figures may just boost the euro, so be sure you’re on your toes!

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EUR/USD went on a wild see-saw ride yesterday. During the Asian session, the pair rallied strongly as a result of the leftover dollar weakness from the previous day. However, the move proved to be unsustainable and the pair quickly dropped like a rock once the European trading session began. EUR/USD, at the end of the day, was trading at 1.3320, just a pip lower from its opening price.

On the economic front, we saw mixed data come out. The German Preliminary Consumer Price Index came in as expected at 0.3%. Meanwhile, the M3 Money Supply y/y printed a 2.8% gain, much higher than the 2.5% increase initially predicted.

Today, only one report is scheduled to come out. At 7:55 am GMT, Germany’s unemployment change will publish. It is slated to show that the number of jobless people decreased by 10,000 in February. We might see the euro pop up slightly if the results come in better than expected.

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Thanks to the slightly optimistic market environment, the euro was able to post some nice gains last Friday. After it had fallen below 1.3300 the day prior against the dollar, the euro rallied slowly to close the trading week at 1.3337. All in all, the euro was up 42 pips against the dollar for Friday.

Data release wasn’t as positive though. The German retail sales report came in with a 1.6% decrease, opposite the 0.5% gain initially expected. It was also a far cry for the 0.1% increase (revised up from -1.4%) from the previous month’s figure.

This week, the only major event scheduled is the European Central Bank (ECB)'s interest rate decision. The market widely expects the central bank to keep changes unchanged at 1.00% like 4 meetings.

The ECB is also anticipated to simply reiterate what it had said in the last meeting - economic growth will be probably be around -0.5% to 3.0% for this year. Still, watch out for any surprises! If the ECB deviates from the market’s expectation, we could see some wild moves on the euro! The actual announcement will happen on Wednesday, at 11:45 pm GMT.

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The euro zone’s PMI reports came up short against the other manufacturing data from other economies yesterday, which is probably why the euro also lost against its major counterparts. EUR/USD slid by 33 pips to 1.3328, while EUR/JPY plunged by 158 pips to 109.37.

The euro zone’s final manufacturing PMI came in at 47.7 in February, its tenth consecutive month at the contractionary level. Apparently, investors are worried that weaker-than-expected manufacturing surveys from Germany and France are reaching the weaker peripheral countries.

Of course, the other data released from the region weren’t any help either. Italy’s monthly and quarterly unemployment rate missed expectations, while the euro zone’s jobless rate surged to a 14-year high at 10.8% Yikes!

The euro zone only has the final GDP and PPI numbers scheduled today at 10:00 am GMT, so we might have to look for other reports that might influence appetite for the common currency. Stick to the news wires, will ya?

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Another one bites the dust! Like most currencies, the euro took a big hit against the dollar as the Fed softened its stimulus stance, leading EUR/USD to slide 96 pips to 1.3232.

The euro zone’s final GDP fell in line with expectations, which isn’t exactly good news since forecasts set the bar low at a growth of -0.3%. Meanwhile, the PPI report came in slightly stronger than expected, clocking in an increase of 0.6% in the price of finished goods and services sold by producers, rather than the 0.5% uptick that was forecasted.

Later, we’ll have more numbers to look at as the euro zone is set to publish retail sales data at 9:00 am GMT. Look for the report to show a 0.1% increase, which is slightly lower than the 0.3% uptick we saw in January. Also, the German factory orders data is due at 10:00 am GMT and is slated to print a 1.2% increase, up from -2.7% the previous month.

But enough about these reports. Today, the markets will be focused on the ECB’s big interest rate decision, which is due at 11:45 am GMT. Though no one really expects the central bank to hike rates, market junkies will be listening in closely for clues as to what the ECB may do next. Some say policymakers are already starting to discuss an exit strategy.

Anyway, if you want to learn more about what to expect from the ECB rate statement, I suggest you take a look at Forex Gump’s most recent article. He cooked up a solid piece which discusses 3 reasons why the ECB will hold its ground. It’s a must-read for anyone trading the euro today! Good luck and happy pipping!

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After four straight days of losses, the euro avoided a clean sweep versus the dollar as it pared some of its losses. EUR/USD finished 34 pips above its opening price to finish at 1.3099. Can the euro build on Friday’s success or will the bearish run continue?

Thanks to worse-than-expected NFP results, we saw higher yielding currencies like the euro take advantage and edge ahead. Make sure to drop by my U.S. commentary for more insight on the U.S. labor market and how it affected the forex markets!

Take note that France and Germany will still be off on holidays today, so we may not see much movement in the markets. Of course, you never know what might hit the markets and given that we’ll have some thin liquidity, we may see some exaggerated moves. Be careful out there homies!

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Talk about starting the week right! The euro edged slightly higher than the Greenback and the Japanese yen in Monday’s trading as risk appetite improved in the markets. EUR/USD managed to find support around the 1.3050 level before closing at 1.3114 while EUR/JPY ended 3 pips higher than the 107.00 handle.

Although the euro zone didn’t release any economic reports yesterday, the euro was able to benefit from the risk rallies spurred by China’s better than expected inflation data. Another factor that propped up the euro against the U.S. dollar was last week’s dismal U.S. NFP figure, which triggered fears of another round of quantitative easing from the Fed.

Today, only a few medium-tier reports are set for release from the euro zone. First up is the German trade balance which is expected to show that the surplus narrowed from 14.2 billion EUR to 13.6 billion EUR in February. A weaker than projected figure could highlight a slowdown in German exports, which might be negative for the euro.

Next up are the French industrial production data and euro zone Sentix investor confidence figure due 6:45 am GMT and 8:30 am GMT respectively. Industrial production in France, euro zone’s second largest economy, is expected to print a 0.2% uptick while the Sentix investor confidence for the entire region could climb from -8.2 to -7.7.

Better keep an eye out for those releases because they could dictate where the euro will be headed today. Bear in mind that weak figures could undermine the euro’s resilience and push EUR/USD to test the 1.3000 handle while strong results could allow the euro to go for more gains. Stay on your toes!

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DJ euro got booed off the stage yesterday, as the shared currency simply couldn’t get its groove on. EUR/USD fell 32 pips to finish at 1.3081, while EUR/JPY simply tanked, dropping 152 pips to close at 105.51.

So what caused the euro’s demise today?

Risk aversion took over the markets like a Kanye West single, as Spanish yields on 10-year bonds soared to above 6%. This bought yields to its highest level since late last year. Take note that many investors consider Spain to be next in line for a bailout and rising yields only give credence to those fears.

In other news, we got mixed economic data, as French industrial production figures came in better-than-expected, while a report showed that investor confidence fell to its lowest level in three months.

French industrial production rose 0.3% last February, which was slightly higher than the projected 0.2%. Unfortunately, the Sentix investor confidence index printed at -14.7, which was way worse than expected -7.7 figure. This was also a reversal from the recent trend that indicated that consumer confidence was slowing improving.

We don’t have any data lined up for today, but keep an eye out for those bond auctions. If we start to see yields on the rise again, we could be in for another sell-off!

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The euro edged higher against its lower-yielding counterparts, namely the U.S. dollar and the Japanese yen, with EUR/USD ending 25 pips up from its 1.3081 open price and EUR/JPY closing 3 pips above the 106.00 handle. Will the euro be able to hold on to its gains today?

Although the euro zone didn’t release any economic data yesterday, the euro managed to stay afloat as Italy announced that its bond auction was a success. It turns out that the Italian government was able to sell 11 billion EUR worth of bonds, which was its target. However, it’s interesting to note that yields spiked higher as expected, implying that investors are still uneasy about holding Italian debt.

Today, the ECB is set to release its monthly bulletin which would contain data on which the central bank based its recent rate decision. Recall that ECB head Draghi and his men decided to keep rates unchanged and make no changes to monetary policy during their rate statement last week, and the ECB monthly bulletin could shed more light on why they decided to do so. Keep an eye out for that at 8:00 am GMT.

Also due from the euro zone today is the industrial production report for the entire region. After rising by 0.3% in January, industrial production could slip by 0.2% in February. A positive reading or at least a stronger than expected one could help the euro hold on to its recent gains while a weaker than expected figure could push the euro back down. Stay tuned for the actual release at 9:00 am GMT.

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The euro participated in yesterday’s risk rally and left its major counterparts eating dust. It gained 82 pips against the dollar, while rising 61 pips against the yen. Booyeah! That’s two in a row now, baby!

As it turns out, the Italian bond auction went off without a hitch (unlike North Korea’s failed rocket launch). As a matter of fact, the demand for its 3-year bonds exceeded the supply by 1.43 times as it was able to sell 2.89 billion EUR of its 3-year bonds at a yield of 3.89%. This helped Italian 10-year bond yields to ease off their recent highs. Hmm… It seems the ECB’s LTRO program has been able to support the bond markets, eh?

In other news, ECB member Benoit Coeure hinted at possible stimulus moves as he said that the central bank may consider bond buying on concerns over high bond yields in Italy and Spain. Meanwhile, the industrial production report delivered an upside surprise as it printed a 0.5% uptick in February instead of the 0.2% decline that many had anticipated. Energy production shouldered much of the gains as it grew by 7.7% month-on-month.

More data coming your way later in the day. German final CPI is due at 6:00 am GMT and it’s slated to remain at 0.3%. Then at 8:00 am GMT, we’ll be treated to Italian industrial production data, which is expected to show a 0.2% following January’s 2.5% dip. Stay on your toes, fellas. We could have an explosive ending to the week!

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Talk about being unlucky on Friday the 13th! The euro got sold-off against most of its major counterparts as risk aversion crept back into the markets. EUR/USD closed 122 pips below its opening price at 1.3076. Meanwhile, EUR/JPY dropped from its intraday high of 107.10 to end the day with a 70-pip loss at 105.94.

So what sent jitters down investors’ spines this time?

It was none other than bonds, Spanish bonds. As Forex Gump discussed in his article, the country’s bond yields have been on the rise lately. On Friday, the borrowing costs for 10-year Spanish debt hit a four-month high, just below 6%. Yikes!

Word around the hood is that investors are worried that Spain may not attract enough demand for its bond auctions scheduled today and on Thursday. If this turns out to be the case, it may only be a matter of time until the debt-ridden country asks for a bailout.

With that said, be sure you keep tabs on updates about the Spanish debt sale today. The government will only be selling 12-month and 18-month bills. However, I have a feeling that investors will take the results as an indicator of how the more important auction on Thursday (when 2-year and 10-year bonds will be sold) could go about.

There is no definite time when the results will be released, but it should be sometime during the London session. Watch out!

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Now that’s how you stage a come-from-behind victory! The euro took a beating early in the day as EUR/USDslumped to as low as 1.2995. However, it regained its composure once the London session began and took the pair up to 1.3137, where it ended the day with a 69-pip gain.

Surprisingly enough, the euro was able to defy gravity despite the fact that Spanish 10-year bond yields climbed above 6% yesterday (first time since November 2011!). And what a time for it to happen! Spain is set to sell up to 3 billion EUR of its 12 and 18-month bills today, and another 2.5 billion EUR of debt on Thursday. If bond yields keep rising ahead of these two major auctions, it could result in another round of risk aversion.

Take note, we also have a few heavy-hitting reports due from the euro zone later in the day.

The German ZEW economic sentiment report is slated to slide down from a reading of 22.3 to 19.7. Meanwhile, the euro zone-wide version of the index is anticipated to slip from a reading of 11.0 to 10.7. At the same time, CPI data will be available. Look for inflation to clock in at 2.6%, just as it did back in February.

If these reports all print above expectations, the euro may very well resume its rally, so be ready for potentially big moves when they come out at 9:00 am GMT!

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After getting off to a slow start, the euro was able to turn things around for the second day in a row, and close significantly higher from its lows. After hitting a low at 1.3090, EUR/USD rallied to as high 1.3173 before settling at 1.3127, down just 10 pips from its opening price. Meanwhile, EUR/JPY finished 50 pips higher to end the day at 106.18.

Bust out the champagne baby! It looks like economic conditions are improving in the euro zone! The euro zone and German ZEW economic sentiment indexes both came in exceedingly better-than-expected, printing at 13.1 and 23.7 respectively. Earlier reports were predicting figures of just 10.7 and 19.7.

This marked the fifth straight month of improvement in both reports and indicates that financial confidence in the economy is improving. Booyeah!

This, along with the good results from the Spanish bond auction, helped boost the euro yesterday. Take note though, that yesterday’s auction was for short-term bonds, which investors are much more willing to buy up as opposed to long-term 10-year bonds. Nevertheless, yields for Spanish bonds fell below 6%, which helped alleviate some of the nervousness of the market.

Moving on, headline and core CPI figures came in hotter than expected yesterday. The headline report showed inflation to be at 2.7%, which was higher than the projected 2.6% figure. Meanwhile, core CPI clocked in at 1.6%, after earlier estimates were predicting it to come in at 1.5%. With inflation coming in stronger than anticipated, it could give reason for the ECB to back off its loose monetary policy.

Only data on tap today is the current account, which will be available at 8:00 am GMT. Expectations are that the euro zone posted a trade surplus of 4.1 billion EUR last February, slightly down from the 4.5 billion EUR in January.

Still, I’m not too sure we’ll see too much of a reaction from this report, as traders seems to be focusing in on bond auctions. That said, watch out on Thursday, as our hombres from the Spanish government will holding an auction for 10-year bonds.

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EUR/USD traded in a perfect “V” pattern yesterday as it dipped slightly during the Asian and morning European trading sessions and recovered all of its losses during the European and U.S. session overlaps. The pair ended the day at 1.3116, barely changed from its opening price at 1.3127.

The economic data flow in the euro zone yesterday was pretty light as only the current account balance was published. It came in with a 1.3 billion EUR deficit, opposite the 4.1 billion EUR surplus initially expected. Moreover, last month’s figure was revised down to 3.7 billion EUR from a 4.5 billion EUR surplus.

Today could be a big day for the euro as the Spanish 10-year bond auction is set to happen. With the Spanish 10-year bond yields hitting a fresh high last week, it’ll be interesting to see how euro traders react to the auction later. If the demand is healthy, then it’s reasonable to expect the euro to strengthen.

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Phew! The euro bulls experienced huge sighs of relief yesterday when the Spanish bond auctions didn’t turn out as bad as many had expected. EUR/USD even sneaked in a 19-pip gain to 1.3135, while EUR/JPY jumped by 59 pips to 107.15. Boo yeah!

Unlike the movie Battleship, Spain’s bond auctions yesterday played out better than many naysayers had expected. Spain sold 1.45 billion EUR worth of 10-year bonds at a yield of 5.743% (higher than February’s 5.403%) and 1.08 billion EUR worth of 18-month [I]letras[/I] at a yield of 3.463% (down from February’s 3.495%).

The mixed results were received pretty well, considering that 10-year Spanish bond yields edged a bit higher at the release of the report. Heck, EUR/USD even stayed on its tight range before ending the day slightly higher than its open price!

Investors are still worried over the possibility of a contagion, of course, which is why you should keep an eye out for the IMF and G20 meetings over the weekend. Word on the hood is that IMF’s Chief Christine Lagarde is knocking on the major economies’ doors for financial contributions, which could be used to help the euro region in case of contagion. Will she meet her $400 billion goal? My friends tell me that she has currently piled a total of $320 billion.

If you want to trade the news though, you can also stay tuned for the German PPI report coming up at 7:00 am GMT, and the German Ifo Business climate coming up at 9:00 am GMT. Both reports are expected to come in a bit better than their previous figures, but make sure you stick around in case we see any surprises!

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Euro bulls celebrated 4/20 right by getting high off pips! Thanks to better-than-expected data and optimism for more funding from the IMF, EUR/USD traded past resistance at 1.3150 and closed the week 75 pips above Friday’s opening price at 1.3210.

The German PPI report for March came in higher at 0.6% than the 0.5% forecast. On top of that, Germany’s Ifo Business Climate index for April also topped expectations. The actual figure came in at 109.9 while the consensus was only at 109.6.

Aside from the positive reports, there was widespread optimism in the markets that the IMF would provide at least 400 billion USD of extra funding to the euro zone. And it looks like those giddy traders were right in keeping their hopes up for the IMF!

Over the weekend, the fund announced that it would boost the euro zone’s firepower by 430 billion USD. This should be good news for euro bulls because it would mean that there is more money to go around just in case Spain needs to get bailed out.

Perhaps economic data from the euro zone would also help sustain the positive vibes for the euro in today’s trading, so keep tabs on them!

We start things off at 7:00 am GMT when the French manufacturing and services PMI reports for April are released. Both are expected to print improvements with the consensus for the manufacturing PMI up at 47.3 from its 46.7 reading in March and the services PMI seen at 50.3 up from its previous 50.1 figure.

Then at 7:30 am GMT, it will be Germany’s turn to release its economic data. Its manufacturing PMI is eyed at 49.0 while the services PMI is anticipated at 52.4.

A few minutes later, at 8:00 am GMT, the euro zone manufacturing PMI will be on tap and it has been predicted to come in at 48.1. The region’s services PMI for April will also be released and it is eyed at 49.4.

Better-than-expected figures may just help the euro extend its gains so make sure you don’t miss the reports later!

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Ooomph! The euro received a roundhouse kick from its major counterparts yesterday after weak economic data, political scuffles, and contagion concerns hit the euro region. EUR/USD even dropped to an intraday low near 1.3100 during the U.S. session! What the heck happened?

If you answered political problems in the region, then you already score one for three. Apparently, investors were bothered when Dutch Prime Minister Mark Rutte and his Cabinet resigned after failing to reach an agreement on austerity over the weekend. You see, credit rating agencies have been knocking on Netherland’s doors for stricter austerity measures.If situations get worse over the next couple of days, then the euro region might lose another AAA-rated economy!

Of course, it also doesn’t help that France’s Sarkozy lost the first round of elections to his rival, Francois Hollande. Hollande is a known advocate for economic growth over austerity measures, so he might shake the euro region’s plans up if he wins the elections.

Another reason why the euro bears sold the currency like there’s no tomorrow is that the economic reports released yesterday missed investors’ expectations. France, Germany, and the euro zone all released their manufacturing and services PMI| numbers. Aside from France’s manufacturing and Germany’s services data, ALL reports printed lower than their previous figures. In fact, Germany’s manufacturing report even fell to its lowest level in 33 months! Yikes!

It also doesn’t help growth concerns in the region when 10-year Spanish bond yields inched closer to the important 6% mark. The yields reached 5.945% yesterday, which fueled concerns that Spain might be the next Greece. Remember, 10-year yields were at around 7% when the other major euro economies asked for bailouts!

Will the euro bulls snatch back some pips today? Only the industrial new orders report at 10:00 am GMT and the Belgium NBB business climate report at 2:00 pm GMT are due for today, so make sure you keep an eye on any political/economic report that might influence risk sentiment!

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Whoa! It looks like the euro was able to shrug off disappointing data like a boss yesterday. EUR/USD ended the day 35 pips higher at 1.3187. Meanwhile, against the yen, the euro gained 47 pips as EUR/JPY closed at 107.21.

Euro zone industrial new orders printed a 1.3% contraction for February and disappointed the market’s expectations which was for a 1.4% uptick. The Belgium NBB Business Climate index for April also failed to impress when it showed that business conditions in the country are worse than what analysts had anticipated. The actual figure came in at -10.7 while the forecast was for a more modest contraction at -8.3.

On top of those reports, the political crisis in the Netherlands also seems far from over! In fact, the parliament is due to receive another set of austerity measures today and a few market junkies are worried that more policymakers could walkout.

Luckily for the euro, Spanish bond yields remained below 6% yesterday. Whew! It also seemed like investors were more concerned about the upcoming FOMC statement than disappointing euro zone data and the Netherlands. Some economic reports released from the U.S. yesterday also fell short of expectations. Consequently, these got some traders worried that Fed Chairman Ben Bernanke could show his dovish side in today’s statement.

With that said, be sure you keep an ear out for what the Fed head honcho has to say as the statement could possibly spark some volatility on USD pairs.

ECB President Mario Draghi is also scheduled to talk today at 7:00 am. Be on your toes for his remarks about the EU economy. If markets sense pessimism from him, we may just see the euro get sold off.