Daily Economic Commentary: Euro zone

Trading Discussion News and Economy
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Surprisingly enough, even with yesterday’s major market events, EUR/USD remained range-bound and merely traded sideways. The pair swung wildly in the hours surrounding the FOMC statement, but it eventually settled at 1.2683, just 2 pips below its opening price.

For a time, the euro actually caught the markets’ interest as Greece’s New Democracy, Pasok, and Democratic Left parties were able to form a coalition government. But Antonis Samaras, who was sworn in as the prime minister, will have a tall task ahead of him as his new government will have to find another 11.6 billion EUR worth of austerity cuts in order to please Greek creditors.

In other news, German Chancellor Angela Merkel seems to be shifting her stance on the issue of using the EFSF to buy bonds of debt-troubled euro zone nations. Earlier this week, German officials said they wouldn’t approve such a move, but yesterday, Merkel said that the fund could possibly be used to purchase sovereign bonds in secondary markets.

Up ahead, we have a whole mess of PMI reports coming our way, beginning with the French flash manufacturing and services PMI at 7:00 am GMT. After that, at 7:30 am GMT, Germany will follow up with its own versions of the reports. Then finally, at 8:00 am GMT, we will take a look at the euro zone-wide manufacturing PMI (forecast to fall from 45.1 to 44.9) and services PMI (forecast to drop from 46.7 to 46.5).

These reports should give us a pretty good picture of recent business activity in the euro zone, and previous releases have moved the markets in the past, so don’t even think of missing them!

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Geronimoooo!!! After enjoying days of consecutive gains against its counterparts, the euro bulls finally cried uncle. EUR/USD plunged by a whopping 137 pips, while EUR/JPY also received an 89-pip blow. So what burst the bulls’ bubble?

The PMI reports from the region didn’t help, that’s for sure. Though the French manufacturing and services PMI came in at stronger-than-expected at 45.3 and 47.3 respectively, it was the German PMI numbers that got the investors’ attention. Manufacturing PMI in the euro zone’s largest economy deteriorated from 45.2 to 44.7 while its services PMI dropped 51.8 to 50.3.

It also didn’t help that market players are starting to worry about the euro zone officials’ ability to come up with a concrete solution in time to save the region’s debt problems. Merkel is set to have a closed door meeting with French President Hollande and Spanish and Italian Prime Ministers Rajoy and Monti this weekend, but investors aren’t hoping for any significant announcement.

Let’s see if the German IfO business climate released at 8:00 am GMT will give the euro bulls reprieve. The data is estimated to come in at 106.1 against the 106.9 figure in May, but make sure you stick around in case the data misses expectations. Meanwhile, the Belgian business climate report will be released at 1:00 pm GMT today.

Good luck trading today, homies!

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EUR/USD struggled to hold on to the 1.2550 minor psychological handle on Friday before ending the day in the green and closing at 1.2562. EUR/JPY also had its share of gains as it ended at 101.02, 28 pips above its 100.74 open price. Can the euro hold on to its recent gains this week?

Germany printed a weaker than expected Ifo business climate reading for this month as the index slipped from 106.9 to 105.3, lower than the consensus at 106.1. That marks the second consecutive monthly drop and its lowest reading in two years! Components of the report revealed that businessmen are gravely concerned about the debt troubles brewing all over the euro zone and are worried that further economic contraction could be in the cards.

There aren’t a lot of red flags on the euro zone’s schedule for this week, which means that we have to be extra watchful of other happenings in the region in order to find out where the euro could be headed. Bear in mind that Italy is set to conduct another bond auction towards the end of the week and I’m pretty sure that most market participants will be paying close attention to their bond yields.

Also, don’t forget that the EU economic summit will take place during the latter half of the week and that we should pay close attention to their discussions and agreements (or lack thereof) when trading euro pairs. Don’t worry, I’ll keep you updated every day!

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Rough start to the week for the euro, as it dropped against the dollar, yen, and pound. Could this be a sign of more losses in the days to come?

Apparently, market players were disappointed when German Chancellor Angela Merkel shut the door on any pleasant surprises from this week’s EU summit. As she has for months now, Merkel rejected the idea of joint euro zone bonds, as this would effectively increase risks to Germany as yields would rise. Since Merkel refuses to budge on this issue, expectations are quickly shifting towards this summit becoming an absolute dud.

In other news, Spain formally requested for financial aid for its banks, which helped send Spanish yields even higher.

For today, we’ve got the preliminary German CPI report scheduled to come in at the start of the London session. Word out of Berlin is that prices remained flat last month, after falling 0.2% the month before. I don’t expect this report to affect trading too much though. Instead, make sure you tune in and listen for any news about Germany’s stance on joint euro zone bonds. If it appears that Merkel is suddenly remotely open to the idea, it could send the euro flying sky high!

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Chop chop! Yesterday was a topsy turvy one for EUR/USD as it struggled but failed to hold on to the 1.2500 major psychological handle. The pair dipped to a low of 1.2442 then managed to close at 1.2496, just 7 pips below its 1.2503 open price. EUR/JPY also had its share of losses as it closed 30 pips below its 99.57 open.

The only report released from the euro zone yesterday was the German GfK consumer climate figure, which came in slightly better than expected at 5.8 when analysts were expecting it to hold steady at 5.7 this month. Although the euro was able to draw a bit of support from this upbeat release, rising borrowing costs in Spain’s short-term debt forced the shared currency to return some of its intraday gains. On top of that, credit rating agency Egan Jones downgraded its outlook on Germany because of the country’s huge exposure to euro zone debt.

Germany is set to release its import prices data and preliminary CPI today, but these reports aren’t expected to have a major impact on euro zone price action. What we should probably keep an eye out for are updates on the euro zone debt situation as well as speculations on the upcoming EU summit. Stay on your toes at all times!

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And the sell-off continues! The euro resumed its gentle slide down the charts yesterday as the markets expressed their lack of hope for a resolution in the upcoming EU summit. EUR/USD receded from its opening price of 1.2495 to end the day at 1.2467.

Comments from European leaders left traders less convinced that the upcoming EU summit will yield anything productive. While a number of euro zone countries (including Spain and Italy) have voiced their desire to have shared euro debt (eurobonds!), German Chancellor Angela Merkel has been headstrong in her stance against it.

Though the EU summit it set to start today, the markets have already been showing their low expectations and selling the euro as early as Monday. That being the case, the euro could very well see more losses if the meeting disappoints.

But keep in mind, since most are expecting very little from the EU summit, we have to consider the possibility that a little bit of good news good lead to a strong rally in euro markets.

All in all, today could be a very volatile day for the euro as the EU summit has been on traders’ minds for the past few days. Aside from that, we also have German unemployment change data (forecast to show an increase of 4,000 up from 0 in April) and the Italian 10-year bond auction on tap. Things could get explosive, so don’t forget to use stop losses!

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Aaand down the euro goes! The shared currency closed lower against the dollar and the yen yesterday. By the end of the New York session, EUR/USD was down 21 pips from its opening price while EUR/JPY was 40 pips lower at 98.89.

The euro dropped like it was hot following comments by German policymakers that they would work on coming up with long-term plans for fiscal integration in the region. The news might have upset investors as they expected European officials to come up with more immediate solutions.

Of course, it also didn’t help that we saw disappointing data from the region. It was reported yesterday that unemployment continued to rise in Germany following the 1,000 increase we saw for March. The country’s unemployment change report came in higher than the expected 4,000 rise at 7,000 for April.

The negative figure weighed on the euro yesterday as it suggests that the economic slowdown is also affecting Europe’s core nations now and not just the periphery. With that said, be sure you keep tabs on the data we have on tap for the day as their outcome may affect market sentiment as well.

At 6:00 am GMT, Germany is expected to report that its retail sales grew by 0.1% in April. Then at 6:45 am GMT, French consumer spending is anticipated to come in flat for the same month. Finally, at 9:00 am GMT, the euro zone’s CPI flash estimate for June is seen to remain steady at 2.4%.

Aside from the reports, also be on your toes for updates from the EU Summit. Signs that EZ officials aren’t willing to make compromises may just send the euro lower in today’s trading. Good luck!

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What a way to end the month! The euro bid adieu to June by posting GINORMOUS rallies on the charts. Thanks to new plans ironed out in the EU summit, the shared currency was able to post a 192-pip gain against the dollar, while rising 228 pips against the yen. Will it extend its rally today?

Finally, Europeans Union leaders have come to an agreement on how to stabilize bond markets! Three main points were agreed upon in the EU summit.

First, the EFSF and ESM will be allowed to fund euro zone banks directly without having to pass through governments. Second, the ESM will no longer hold priority status over the private sector. And lastly, European leaders have decided to use the bailout funds in a “flexible and efficient” way to stabilize markets.

If you wanna learn more about what was discussed in the EU summit, y’all only have to read Forex Gump’s article on the 3 things EU leaders agreed on. It’s a must-read yo!

In any case, the developments in the EU summit seem to have pleased the markets because once word got out, markets went crazy and a strong risk rally ensued.

But now we have to wonder how long this rally will last. Will we see a bit of profit taking? That’s a possibility we have to consider.

Today, we have the Italian manufacturing PMI due at 7:45 am GMT, and survey says we’ll see the index slip from 44.8 to 44.6. Meanwhile, the euro zone final manufacturing PMI, expected to come out at 8:00 am GMT, is slated to stay steady at 44.8. After that, at 9:00 am GMT, we’ll take a look at the euro zone unemployment rate, which most believe will rise slightly from 11.0% to 11.1%.

However, the highlight of the week won’t come out until Thursday, when the ECB is set to hold its next rate decision. Will the central bank finally slash rates and announce more monetary easing? Only time will tell!

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With all the hoopla following the EU summit dying down, the euro gave back some of its gains to start the week. EUR/USD dropped 92 pips to finish at 1.2586, while EUR/JPY finished at 100.09, down 105 pips from its opening price.

The Italian manufacturing PMI and euro zone unemployment reports both came in as expected, with the PMI printing at 44.6 and the unemployment rate clocking in at 11.1%.

But of course, the news that shook the markets was the announcement that both Finland and the Netherlands were against using the ESM to purchase government bonds. The Finnish see bond purchasing as inefficient, while the Dutch PM is also not in favor of bond purchasing.

While these two nations don’t hold enough power to completely block off the proposal, it does highlight how we are far from solving the many issues that are weighing down the euro zone. It will be interesting to see how other members of the euro zone vote on the issue of bond purchasing via the ESM and whether it can even push through.

No hard data on the docket from the euro zone, so we could see more subdued trading from euro pairs today.

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Due to the lack of market-moving events, the euro was unable to make significant strides against the safe haven dollar yesterday. The euro simply ranged the entire day, finding support at the previous day low at 1.2568 and resistance at the 1.2600 major psychological level. By the end of the day, the euro was only 22 pips higher versus the dollar.

Euro zone’s producer price index was the only report released yesterday. It came in at -0.5%, much worse than the 0.2% decline initially expected.

Today will probably turn out more exciting as a bunch of medium-tier reports are on deck. At 8:00 am GMT, euro zone’s final services PMI will be released. It is expected to print a reading of 46.8, just like the reading we saw last month. Shortly after, at 9:00 am GMT, euro zone’s retail sales report will be published. The forecast is a 0.2% increase, which is opposite the 1.0% decline seen in the previous report.

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Even with Uncle Sam off on holiday, we actually saw some decent-sized moves on EUR/USD. The pair broke through support at around 1.2570 and eventually settled at 1.2536, marking a 70-pip loss on the day.

Interestingly, the euro dropped even though both the final services PMI and retail sales reports came in better-than-expected. The services PMI printed at 47.1, marking a slight improvement from the previous month’s score of 46.8. Meanwhile, retail sales grew by 0.6% last month, after it was projected to increase by just 0.2%.

Despite the better-than-projected results, the euro still dropped as traders began preparing themselves for today’s ECB rate decision(11:45 am GMT) and most likely wanted to reduce their exposure to euro positions. Expectations are that the ECB will be cutting interest rates by 25 basis points, bringing baseline rates down to 0.75%.

While rate cuts are normally bearish for a currency, there’s no telling what may happen at tonight’s interest rate decision. For all we know, the markets will react positively knowing that the ECB is doing its part to help boost the economy. In any case, make sure you also tune in at 12:30 pm GMT, when the ECB will be making its accompanying statement, as it could provide some clues as to what the ECB has planned over the next few months.

Don’t forget, we have German factory orders due at 10:00 am GMT while Spanish and Italian bond auctions will be taking place during the London session. Factory orders are seen to have increased by 0.1% last month, which would be a sigh of relief after the previous month’s 1.9% decline. If this comes in worse-than-expected and we see bond yields on the rise, we could see some euro selling just ahead of the central bank rate decision.

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What a day! In a gigantic move that saw traders sell-off the euro like there was no tomorrow, EUR/USD slipped 147 pips to close just below the 1.2400 handle. Blame it all on Draghi!

ECB President Mario Draghi was responsible for yesterday’s huge drop as he announced the ECB’s much-anticipated rate decision. While the ECB’s rate cut (from 1.00% to an all-time low of 0.75%) came as no surprise, what caught the markets off guard was Draghi’s accompanying statement.

According to the ECB top dog, policymakers are now seeing signs of weakness all over the euro zone… even in countries that were doing fine just a few months ago! Cue the horror music, folks!

We’ve known all along that the debt-troubled PIIGS nations are experiencing economic headwinds, but the fact that even Germany, the region’s largest and strongest economy, is starting to show softness is downright scary!

Another big surprise was how cautious Draghi sounded, as he didn’t signal any further easing measures down the line. That being the case, the markets are unsure as to whether the ECB will continue to act to support the economy in the future.

Today, we only have German industrial production data on tap, and the report is slated to print an increase of 0.2% after showing a decline of 2.2% in April. Though this release isn’t heavily tracked, it could aggravate euro bearishness if it prints a big downside surprise, so it might be a good idea to stay on your toes when it comes out at 10:00 am GMT.

Also, remember that the U.S. NFP is due later at 12:30 pm GMT. A weak reading from this report could help the euro erase some of its losses from yesterday.

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BOOM! The euro took triple roundhouse kicks against its counterparts last Friday after risk aversion and weak economic data dragged high-yielding currencies lower across the board. EUR/USD took a 107-pip hit, while EUR/JPY also dropped by 117 pips. What had gotten the euro bears so excited?

Well, traders haven’t forgotten about the ECB, BOE, and PBoC’s attempts at stimulating their economies, that’s for sure. It also didn’t help that IMF Chief Christine Lagarde said that global economic growth might be weaker in the next few quarters [I]despite[/I] the recent downward revisions to estimates. Yikes!

What got the euro bears excited though, is the weak NFP report that came out from the U.S. The data came in at 80,000 for June, which is the fourth consecutive month that the report disappointed expectations.

The data supported arguments for a slowdown in global economic growth, which weighed on high-yielding currencies like the euro. Never mind that Germany’s industrial production data actually showed a 1.6% growth in May compared to April’s 0.2% uptick!

Today the fireworks will most likely come from ECB head honcho Draghi himself, when he delivers his speech at 12:30 pm GMT in Brussels. Watch for hints of additional stimulus for the central bank, aight? Word on the streets is that the ECB is about to give the Fed a run for its money when it comes to stimulating the economy.

While waiting for Draghi’s speech, you can also set your sights on the German trade balance data out at 6:00 am GMT, followed by the euro zone’s Sentix investor confidence report. Germany’s trade surplus is expected to weaken while the Sentix data is seen to strengthen a bit, but make sure you keep an eye out for any surprises!

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Amid rising European bond yields and negative data, the euro bulls still managed to edge out most of their counterparts and push the euro to end yesterday’s trading higher. Talk about being stubborn, huh? EUR/USD closed 60 pips above its opening price at 1.2315. Meanwhile, EUR/JPY was up 42 pips to 98.00.

On the economic front, the EZ Sentix Investor Confidence for July printed a bigger decline than what analysts had braced for. It came in at -29.6 when the forecast was only at -29.3, suggesting that investors and analysts are even more pessimistic about their outlook for the EZ economy than before.

Also, Spanish bond yields shot up once again above the crucial 7.00% mark, to as high as 7.06% yesterday. Yikes!

Although the euro’s performance makes it seem that it is immune to spikes in bond yields and disappointing economic data, you should remember that higher borrowing costs as well as slower growth amid austerity measures are at the very core of Europe’s problems.

With that said, be sure you keep tabs on the events we have scheduled from the euro zone today.

At 6:45 am GMT, the French industrial production report for May will be on tap, and it is eyed to print a 0.9% contraction for the month.

More importantly, you should know that European finance ministers are meeting today. Word around the hood is that they would probably discuss the possibility of granting Spain another extra year to meet its deficit targets as well as the details of its bank bailout.

Be on your toes for updates from the meeting as they could move bond yields and potentially weigh down the euro. Good luck!

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The euro dropped to a new two-year low yesterday as the ECB’s 25 basis point reduction in interest rates continued to put it under pressure. EUR/USD, which had started the day at 1.2316, was trading at 1.2252 at the end of the U.S. trading session.

It seems that investors are pricing in further rate cuts. In addition, German Chancellor Merkel has been voicing her opposition to the joint issuance of debt again. Even though she has already acceded to the demands for relief for Spain and Italy, she was reluctant to give in to the idea of Eurobonds.

Economic data released yesterday was mixed. French Industrial Production for June was weaker than expected and showed a 1.9% decline while Italian Industrial Production beat forecast and published a 0.8% gain.

The only major event scheduled to happen the euro zone today is the German 10-year bond auction. If the auctions perform well and investors show a healthy demand for Germany’s bonds, we could see the euro recover from its 2-year lows.

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That’s another new low for EUR/USD, ladies and gentlemen! EUR/USD dipped to a new 2012 low of 1.2213 after the release of the FOMC meeting minutes while EUR/JPY struggled to hold on to the 97.50 handle. Will the euro pairs continue to head south today?

The latest FOMC minutes revealed that policymakers were still undecided on QE3 and this seemed to bring relief to the U.S. dollar, pushing EUR/USD to a brand-new low for the year. With that, the pair seemed to ignore Spain’s decision to implement more austerity measures and the German 10-year bond auction which turned out better than expected.

Only a couple of medium-tier reports are on euro zone’s schedule for today. These are the ECB monthly bulletin and the industrial production figure, which is expected to stay flat in May. One possible event risk for the euro pairs is ECB head Mario Draghi’s speech at 12:00 pm GMT as he could talk about the central bank’s next monetary policy moves. Keep an eye out for that!

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If you think EUR/USD’s suffering is over, then think again! The pair tapped yet another 2-year low yesterday as global growth concerns continued to dominate the market. EUR/USD, which had started the day at 1.2243, found itself sitting miserably at 1.2204 by the end of the U.S. trading session.

Data from the euro zone was mixed. For instance, the Industrial Production report beat the market’s forecast. It came in with a 0.6% increase and not flat. On the other hand, Greece’s official labor figures showed that the jobless rate continued to push higher to 22.5% from 21.9%.

Euro zone’s economic cupboard today doesn’t have much to offer but the Italian 10-year bond auctions. This normally isn’t a market mover, but with the region’s debt crisis in the spotlight, traders will be closely watching the event. If there’s ample demand for Italy’s bonds, then we could see the euro recover some of its losses.

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SCOOOOORE! The euro finally snuck some pips against its counterparts last Friday when traders shrugged off weak economic news from the markets. EUR/USD climbed by 37 pips, while EUR/JPY also enjoyed a nice 23-pip rally. What exactly made the currency bulls’ day?

Last Friday Moody’s dropped another downgrade bomb in markets when it downgraded Italy’s debt two notches lower to Baa2 just a couple of hours before the Italian bond auctions. Not only that, but China’s big GDP number also turned out weak at 7.6%, it’s slowest growth in three years.

Good thing that traders were feelin’ optimistic at the time! China’s weak GDP turned out positive for high-yielding currencies as it was almost in line with already weak expectations. Even Italy’s downgrade was shrugged off, as the Italian bond auction fetched 5.25 billion EUR in midterm and long-term bonds with yields in three-year bonds dropping from 5.30% to 4.65%.

Let’s see if the euro bulls are still in the mood to overlook a few disappointing economic reports. At 8:00 am GMT we’ll see Italy’s trade numbers, while the euro zone’s inflation and trade figures will be out at 9:00 am GMT. These reports don’t usually get a lot of attention, but you’ll never know when news trading junkies strike!

Good luck in your trades, homies!

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The euro looked as though it was going to record another day of losses, but at the last minute, in came the bulls to save the day! They bought EUR/USD from an intraday low of 1.2175 to force the pair to close at 1.2278, up 15 pips from its opening price. What a comeback!

It seems euro bulls have the U.S. to thank for yesterday’s rally. An incredibly disappointing U.S. retail salesreport fueled bets for QE3, prompting traders to buy up higher-yielding assets and ditch safe haven currencies. Of course, this worked out to the benefit of the euro in its battle against the Greenback!

Prior to the New York session rally, the euro was actually being ditched by the markets. Apparently, traders were focused on a report that said that the ECB wants senior bondholders of Spanish banks to take on losses. But so far, finance ministers have said that they’ll have none of that!

In other news, forecasts were spot on with their predictions for the euro zone CPI. The headline figure stayed at 2.4% while the core figure remained steady at 1.6%… just as expected!

Today, we have the ZEW surveys on tap at 9:00 am GMT. Look for the German report to register a drop from -16.9 to -17.3 in July. Meanwhile, the euro zone-wide version is expected to improve from -20.1 to -18.3. If these reports post big upside surprises, it could give the euro another big boost. Don’t miss 'em, homies!

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Look who’s extending the bull party! Thanks to U.S. data, traders shrugged off weak reports from the euro region. EUR/USD closed 11 pips higher than its open price after hitting a low at 1.2189, while EUR/JPY also sported a 40-pip gain. What energized the euro bulls?

Big Ben Bernanke had played a huge role, of course. In his bi-annual testimony in front of the Senate, Bernanke hinted that the Fed is considering stimulus options for the economy. And we all know how the currency bulls love the S-word!

Good thing that traders had focused on Bernanke though. If they hadn’t, then they would’ve minded that Germany’s investor confidence printed at a six-month low, while the euro zone’s ZEW economic sentiment also came in at -22.3 in July against expectations of a -18.3 reading.

No economic data will be released from the region today, so make sure you got your eyes peeled for any news in other major economies that could affect demand for the euro!