Eur/usd - page 60
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ECB holds rates at record-low 0.25%; Draghi comments eyed
The European Central Bank held its benchmark interest rate at a record low in January, in a bid to safeguard the faltering economic recovery in the region, it announced on Thursday.
The ECB said it was maintaining its benchmark interest rate at a record-low 0.25%, in line with market expectations. The central bank also held its marginal lending at 0.75% and left its deposit facility rate unchanged at 0.0%.
ECB president Mario Draghi was to comment on the decision at a press conference later in the day.
Market participants will scrutinize Draghi’s comments for clues in regards to the central bank's next course of action in dealing with an ongoing sovereign debt crisis.
Following the announcement, the euro held on to gains against the U.S. dollar, with EUR/USD rising 0.27% to trade at 1.3612.
Meanwhile, European stock markets remained higher. The EURO STOXX 50 advanced 0.65%, France’s CAC 40 added 0.1%, Germany's DAX tacked on 0.3%, while London’s FTSE 100 tacked on 0.2%.
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EURUSD Tumbles On Draghi's Downbeat Jawboning, "Strenghtened Forward Guidance Wording
Between his downbeat "more downside risks" outlook, "extended low inflation" perspective, and strengthened "forward guidance," Draghi has, once again, managed to talk down the EUR (for now). EURUSD has dropped almost 100 pips since he began speaking..."we firmly reiterate our forward guidance that we continue to expect the key ECB interest rates to remain at present or lower levels for an extended period of time," adding that "the Governing Council strongly emphasizes that it will maintain an accommodative stance of monetary policy for as long as necessary." US Treasuries are rallying alongside this tumble.
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Europe's two-speed economy
The uneven economic recovery in Europe is leaving central bankers with very different challenges.
The European Central Bank is facing calls for more action to stimulate activity, while the Bank of England tries to figure out how to react to a recovery that is racing forward.
Both central banks kept interest rates unchanged Thursday.
Neither was expected to make a move but the ECB made clear it may have more work to do. It cut rates to a record low of 0.25% in November, alarmed by a sharp fall in inflation and the risk that the eurozone recovery could be derailed before it started.
The bank then sat on its hands in December, but ECB president Mario Draghi used stronger language Thursday, warning it was premature to declare victory in the eurozone crisis.
"We will act if we have reason to think that our medium-term expectation for inflation is changing for the worse," he said at a news conference.
The eurozone economy is at risk of stagnation after emerging from its longest recession last year.
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Germans embracing EU more than ever: poll
A record number of Germans believe that being part of the European Union is a good thing for the country, a new poll showed Friday, amid creeping euroskepticism among several neighbours.
Forty percent of those asked said membership of the 28-nation bloc reaped benefits, marking the highest level ever recorded in the DeutschlandTrend poll.
Some 19 percent, on the other hand, saw it as leading to disadvantages, the poll for ARD television showed.
In April 2010 the figures had stood at 25 and 27 percent respectively.
Germany's robust economy and growing jobs market could be one reason for the rise, the pollsters said.
With European Parliamentary elections set for May, 64 percent of Germans said they would like to see more common policies in Europe, compared to 31 percent who said countries should act more strongly again alone, the poll said.
Meanwhile Chancellor Angela Merkel, long Germany's most popular politician, is slightly behind her finance minister Wolfgang Schaeuble as the country's most popular leaders, with 75 and 76 percent respectively in the poll.
Some 1,004 people were polled on January 6 and 7.
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IMF's Lagarde: uncertainty over health of European banks
International Monetary Fund Managing Director Christine Lagarde said Thursday that questions marks remain over the health of Europe's banks and that coming stress tests are a chance to build confidence in them.
In an article published online by Project Syndicate, Lagarde said Europe is "at a key juncture", showing signs of recovery but stuck with "uneven and unbalanced" growth.
"While many countries are doing well, demand in general remains weak, and unemployment in the periphery remains obstinately high, particularly for young people."
"One area of uncertainty for Europe is the health of its banks," she said.
"The forthcoming stress tests and asset-quality review can help restore confidence and advance financial integration, but only if they are conducted well."
The European Central Bank has said it will conduct stress tests on the banks sometime this year, to see if they have rebuilt their capital enough to withstand new crises.
Lagarde also called on the region to boost demand and advance reforms that will help generate jobs.
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Britain closer to EU referendum as bill clears hurdle
Britain's planned referendum on membership of the European Union passed its first hurdle in parliament's upper house on Friday, but lawmakers warned that the bill could be killed off by delays.
The bill -- which is backed by Prime Minister David Cameron's Conservative party and guarantees a public vote on EU membership by 2017 -- passed the "second reading" stage unopposed in the House of Lords after a marathon seven-hour debate.
But there were warnings from members of the Conservatives' coalition partners, the pro-EU Liberal Democrat party, as well as opposition Labour peers that the bill could face such heavy delays that it could be scuppered altogether.
Lawmakers intend to table a series of amendments to the European Union (Referendum) Bill.
The legislation must return to the lower House of Commons and successfully pass through it by February 28, meaning that lengthy amendment debates could result in the bill running out of parliamentary time.
As a so-called "private member's bill" introduced by an individual lawmaker, as opposed to the government, parliamentary rules dictate that there is only a very small number of days on which it can be dealt with.
Cameron, under pressure from the eurosceptic wing of his party, has promised to renegotiate Britain's relationship with the 28-member bloc before holding an "in/out" referendum if his Conservatives win the next general election in 2015.
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EUR/USD Forecast January 13-17
EUR/USD had an interesting week, in which it managed to emerge from the lows and end higher. Can it break out of range? Industrial Production, the ECB Monthly Bulletin and inflation data are the highlights of this week. Here is an outlook on the major events and an updated technical analysis for EUR/USD.
After the ECB left the rates unchanged for a second month in a row, Mario Draghi reassured that the central bank keeps track of money markets to prevent further damage to the euro and promised to deal with falling inflation in the Euro area without specifying the means of action. This hurt the euro, but the pair was later aided by news from the other side of the Atlantic. The US Non-Farm Payrolls badly disappointed with a gain of only 74K. The drop in the unemployment rate only marginally helped, and left a lot of confusion. What will be the next driver of the pair?
* All times are GMT
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EUR/USD weekly outlook: January 13 - 17
The euro rose to more than one week highs against the dollar on Friday after far weaker-than-forecast U.S. employment data for December raised doubts over the outlook for the economic recovery.
EUR/USD rose to 1.3686, the highest level since January 2 and was last up 0.45% to 1.3668. For the week, the pair gained 0.29%.
The pair is likely to find support at 1.3552, the low of January 8 and resistance at 1.3700.
The dollar turned broadly lower after the Labor Department said the U.S. economy added 74,000 jobs in January, the smallest increase since January 2011 and well below expectations for 196,000 new jobs.
The unemployment rate fell to a five year low of 6.7% from 7% in November, but this was due in part to people dropping out of the labor force. The labor participation rate fell to an almost 35-year low of 62.8%.
Inclement weather in December contributed to the slowdown in hiring, as the construction sector cut 16,000 jobs, the biggest drop in the industry in 20 months.
The unexpectedly weak data tempered expectations that the Federal Reserve would cut its stimulus program again this month. The Fed cited a stronger labor market in its decision to cut its asset purchase program by USD10 billion in December, reducing it to USD75 billion-a-month.
The euro’s gains were held in check after European Central Bank President Mario Draghi reiterated the bank’s forward guidance on rates on Thursday, saying monetary policy will remain accommodative for as long as necessary.
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Eurozone brushes with normal as investors return
he eurozone may be finally returning to some semblance of normality after years of debt crisis that brought fear to the world.
It's been two years since the now 18-member currency bloc was fighting for its life and investors are again knocking on the eurozone's door, buying up assets deemed dangerous only months ago.
The latest sign of this is on the bond markets, where the borrowing rates for countries that seemed on the verge of a precipice are back at levels last seen before the crisis.
"The risk associated with the eurozone has reduced significantly in the past few months," said Christian Parisot, an economist at Paris-based investment bank Credit Agricole CIB.
Spain, Italy, as well as bailed out Portugal and Ireland have seen their borrowing rates fall sharply.
By the end of the week, Spanish benchmark debt was trading at about 3.8 percent, a long way off the danger level of more than six percent hit in 2012. Italy was at 3.9 percent.
Falling sovereign yields help to boost economies, and crucially lift the pressure on governments to impose yet more austerity measures on their people.
"There is a broad strong market sentiment which is getting ever more robust and resilient which is positive for the eurozone periphery," said Christian Schulz, senior economist at German private bank Berenberg.
Reassured, Ireland went to the markets on Tuesday and Portugal on Thursday, both meeting heavy demand for medium to long-term debt.
"PIIGS (sic) can fly," said analyst Holger Schmieding of Berenberg bank, using the acronym coined by cynics for Portugal, Ireland, Italy, Greece and Spain.
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German Machinery Orders Increase In November
Orders for German machinery and equipment increased notably on strong foreign demand in December, the industry group VDMA said Monday.
Orders increased 7 percent from the previous year in December. Domestic orders dropped 1 percent, while foreign demand increased 12 percent.
During three months to November, orders declined 3 percent from the same period of last year.