Eur/usd - page 43
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Germany's HICP Inflation Weakens In October
Germany's EU harmonized inflation slowed notably in October, and came in below economists' expectations, preliminary estimates released by the Federal Statistical Office showed Wednesday.
Inflation as per the harmonized index of consumer prices (HICP) eased to 1.3 percent in October from 1.6 percent in September. Economists were looking for in inflation rate of 1.5 percent.
The HICP decreased 0.2 percent from September, when it stayed unchanged. Economists expected the index to stay flat in October also.
At the same time, the consumer price inflation weakened to 1.2 percent in October from 1.4 percent in the previous month. The CPI inflation was forecast to stay unchanged at the September level.
Sequentially, consumer prices decreased 0.2 percent in October, after holding steady in September. The index was forecast remain unchanged
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Spain ends two-year recession with 0.1% growth
Spain has seen its first quarterly economic growth since 2011, according to data from the country's National Statistics agency INE.
The country's GDP grew 0.1% in the July-to-September period, after contracting for the previous nine quarters.
Its growth confirmed last week's estimates from the Bank of Spain.
Spain was one of the countries worst hit by the global economic crisis, with street riots and soaring unemployment.
The statistics mean Spain is officially out of recession.
The INE said an increasing number of exports supported the growth, with a boost to the tourist industry from holidaymakers avoiding northern Africa and the Middle East.
Ben May, economist at Capital Economics, said the growth was encouraging and cited business surveys that suggested there "may be more to come in the near term".
Mr May said: "However, domestic demand is still contracting and against that backdrop, it's hard to see a strong and sustained recovery."
Spain's economy has been ailing since its property bubble burst in 2008.
Its banks needed government bailouts from other European countries to survive, after they were left with hundreds of billions worth of euros in bad debts.
Since then, the country has endured Europe's highest level of unemployment, at 26%. There have been huge street protests in response to government austerity cuts and thousands of businesses have gone bust.
Spain's government recently predicted the end of its recession wa
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ECB Makes Crisis Cash Lines at Central Banks Permanent
The European Central Bank said it is making its liquidity swap arrangements with global central banks permanent, turning crisis-era facilities into standing backstops for times of financial turbulence.
In an e-mailed statement, the Frankfurt-based ECB said it is converting temporary, bilateral arrangements with the Bank of Canada, the Bank of England, the U.S. Federal Reserve, the Bank of Japan and the Swiss National Bank into standing facilities, allowing banks to access global currencies as well as the euro when needed.
The ECB has cooperated with the world’s other major central banks since the global financial crisis started in 2008 to keep funds flowing even as markets froze. As the debt crisis in Europe eased, the ECB kept emergency measures in place, including allowing banks to access as much cash as they need.
“The existing temporary swap arrangements have helped to ease strains in financial markets and mitigate their effects on economic conditions,” the ECB said. “The standing arrangements will continue to serve as a prudent liquidity backstop.”
The ECB this month established a currency swap line with the People’s Bank of China, bolstering access to trade finance in the euro area and strengthening the international use of the yuan.
The ECB also said that it will also continue to conduct regular operations in U.S. dollars, providing funds to banks with 7-day and 3-month maturities until further notice.
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Eurozone Inflation Near 4-Year Low; Unemployment At Record 12.2%
Eurozone inflation reached a four-year low in October helped by the strength of the euro, while the unemployment rate remained at a record high in September, suggesting that additional measures are needed to preserve the recovery, official data showed Thursday.
Inflation fell to 0.7 percent in October, the lowest rate since November 2009, flash estimate published by Eurostat showed. The rate was expected to stay unchanged at 1.1 percent in October.
Inflation has remained below the European Central Bank's target of 'below, but close to 2 percent' for the ninth month in a row. The latest slowdown was driven by a notable fall in energy prices, combined with an easing in food inflation.
Another report from Eurostat showed that the unemployment rate held steady at a record-high of 12.2 percent in September after the rate for August was revised up from 12 percent.
The number of unemployed persons in euro area was 19.447 million in September, which was up by 60,000 from August. Compared with September 2012, unemployment rose by 996,000.
The unemployment rate in EU28 was 11 percent, also stable compared with August. Among the EU member states, the highest unemployment rate was in Greece, followed by Spain.
IHS Global Insight Chief European economist Howard Archer said that a combination of very low inflation, an uncomfortably strong euro, and a failure of Eurozone growth to gain appreciable momentum will eventually prompt the ECB into taking its interest rate down to 0.25 percent from 0.50 percent.
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Italian Unemployment Hits Record High In September
Italy's unemployment rate increased more-than-expected in September and reached a record high as economic activity continued to be dragged down by the ongoing recession, and placements stalled amid fears that a recovery is unlikely in the near future.
The seasonally-adjusted unemployment rate advanced to 12.5 percent in September from 12.4 percent in August and 12.1 percent in July, data released by statistical office Istat showed on Thursday.
The September figure was the highest ever registered since records started in 1977. Economists had forecast a decline to 12.3 percent.
The number of unemployed persons increased 0.9 percent month-on-month to around 3.2 million in September. Compared to September 2012, unemployment climbed 14 percent.
The jobless rate for the young population, aged between 15 and 24, climbed to a record high of 40.4 percent in September from 40.2 percent a month earlier. There were around 654,000 unemployed youth in the country at the end of September.
The employment rate decreased to 55.4 percent in September from 55.6 percent a month earlier. The number of employed persons dropped 0.4 percent sequentially to around 22.35 million during the month.
Amid rising unemployment, households are more downbeat on prospects of the Italian economy. Last week, latest survey data showed that confidence among Italian consumers weakened in October, with all sectors of the economy showing deterioration in sentiment.
Separate data from the statistical office today showed that inflation in Italy unexpectedly slowed to 0.7 percent in October from 0.9 percent in September.
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Draghi could change expectations on rates and LTRO
The ECB does not need verbal intervention do push the euro lower. Draghi can change rate and liquidity expectations without talking about the exchange rate, and the euro will likely follow. The Trichet era showed that trying to manage the currency through verbal intervention was pretty futile, says Simon Smith of FxPro.
In the interview below, Smith also discusses the need to taper QE in the US, Abe’s third arrow and other topics moving currencies.
Simon has over seventeen years experience of macro forecasting and investment strategy research. Prior to joining FxPro in May 2010, Simon was a consultant with Thomson Reuters, having spent four years as Chief Economist at Weavering Capital. He has held economic and strategy positions with Standard & Poor’s, together with consultancy firms 4Cast and MMS International. Simon holds an MSc. in Economics from the University of London and a BSc. from Brunel University.
Expectations for QE tapering have been pushed back to 2014. Could the Fed even take one step further and increase bond buys?
That’s a pretty low risk event from my point of view. We saw limited changes to the statement in October, which to a degree increased the risk that the Fed started tapering at the December meeting. We’ll have to wait for the minutes to hear their view on the government shut-down to get a sense, if any, of how they view the risks from that. It’s been nearly 5 years now since the Fed started quantitative easing. As with Japan, the marginal returns from that are falling. USD 85bln a month has a lot lower impact on asset prices and the economy than would have been the case at the beginning. So, do more, you may say, but there comes a point where the benefits from that are going to start out-weighing the costs (bubble risks). That’s very hard to balance out, but in a relative sense there can be little doubt that we are a lot closer to that tipping point that was the case two years ago.
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Greek Manufacturing Activity Falls Further In October
The Greek manufacturing sector contracted further in October, and at a slightly faster pace than in the previous month, data from a survey by Markit Economics showed Friday.
The manufacturing purchasing managers' index, adjusted for seasonal variations, dropped to 47.3 in October from 47.5 in September, indicating a further deterioration of operating conditions. Readings above 50 indicate expansion, while readings below 50 suggest contraction.
New orders placed with manufacturing firms decreased at a faster pace in October, owing mainly to a more marked decrease in overseas demand.
In line with the decrease in order intakes, production at Greek factories dropped further in October, extending the current sequence of contraction to 49 months.
Input prices paid by goods producers declined moderately, marking the second fall in the past 52 months. Output charges continued to fall as firms sought to boost demand and implemented competitive pricing strategies.
by RTT Staff Writer
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EUR/USD dips below long term uptrend support – confirmation awaited
EUR/USD continues falling relentlessly. The last swing lower already sent the pair below the long term uptrend support line. The drop below the line can be seen in the daily and hourly charts. However, we have already seen a false break in mid-October, and confirmation is needed.
If the pair remains below these levels over the weekend, we could receive the needed confirmation. Here are the charts:
It is a small dip below the line on the daily chart. Note that the pair lost the uptrend channel that accompanied it earlier.
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Tough week for the euro, but hard to be USD bullish – weekly overview
It was a tough 5 days for the Euro, which has slid versus the USD every day this week. After carving out fresh multi-year highs the week prior, the common currency came under significant pressure following lackluster inflation data and a record high unemployment result.
As the dust starts to settle, the Euro has given up over 3-big figures versus to the USD and despite starting the week strong against both the Japanese Yen and the Sterling, has ended softer than where it started. The theme of Euro softness is a product of speculation that given weak data the European Central Bank (ECB) may look be looking to cut its benchmark rate, currently 0.5%, as early as next week at its regularly scheduled monetary policy announcement.
This sharp move down in the common currency presents buyers, whom have largely been sidelined recently, with a bit of a reprieve. Looking to next week the data calendar is pretty limited in terms of top tier data, however Thursday’s ECB activity will keep markets on their toes in the days prior to. The Sterling on the other hand has plenty of related data slated for next week, highlights including central bank action on Thursday and Manufacturing Production on Wednesday. No change in monetary policy is expected. Despite the strong GDP result earlier this month, Bank of England Chief Mark Carney has been very clear that he doesn’t feel that the UK recovery has enough momentum to sustain itself without the current stimulative policies and he intends to play it safe.
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EUR/USD Forecast November 4-8
EUR/USD had a terrible week, falling around 300 pips. Is the pair oversold, or does the fall in inflation justify an extension of the fall? The euro is now in the hands of ECB President Mario Draghi and the rate decision becomes even more important that normally. In addition, manufacturing and services PMIs, employment and industrial data will also move the common currency. Here is an outlook for these events among others, and an updated technical analysis for EUR/USD, now on much lower ground.
European data disappointed on all fronts, including a rise in unemployment and a drop in German retail sales. The biggest shocker for the euro came from a big drop in inflation: 0.7% YoY, very far from the ECB’s 2% target. Together with the not-too-dovish US FOMC statement, the pair had a clear direction to go: down, and even dipped below long term uptrend support. Will Draghi cut the rates or announce a new LTRO?
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