Eur/usd - page 70
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ECB sees no deflation risk for now: Praet
The European Central Bank sees no current risk of deflation nor signs of people delaying purchases, policymaker Peter Praet said in a newspaper interview published on Tuesday.
Praet, who holds the economics portfolio on the ECB's Executive Board, told Belgian newspaper De Standaard that persistently low inflation would represent a risk.
But this was at the moment being mainly driven by subdued food and energy costs. Energy prices are highly volatile.
"Weak demand and high unemployment could also be playing a role," he said.
The ECB's mandate is to deliver price stability, which it defines as inflation of close to but below 2 percent over the medium term.
Euro zone inflation is currently running at just 0.8 percent - well below target. "We accept that price developments are weak and that the weakness is continuing in the medium term," Praet said.
ECB President Mario Draghi said the central bank had not changed interest rates this month because of the need for more information about the economic recovery, putting markets on alert for a possible move in March, when the region's updated inflation outlook is due.
The ECB holds its next policy meeting on March 6.
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Mario Monti brought in to find new EU funding ideas
Former Italian prime minister Mario Monti has been handed the thorny task of finding new sources of funding for the EU budget, European authorities announced Tuesday.
Europe's leaders are hoping Monti's pedigree will help in formulating new funding ideas to avoid the deadlock that occurs every seven years when the 28-member bloc debates its common budget.
Aware of the uphill challenge he faces in leading a working group on the subject, Monti joked that one of the reasons he took the job was "a great curiosity about a subject that is practically impossible to resolve."
European Commission President Jose Manuel Barroso said he had great faith in Monti, an economist and former European Commissioner.
"I have had the pleasure of working closely with Mario Monti in the past and can think of no better person to steer the work of the group with professionalism, integrity and intellectual rigour," Barroso said.
The commission has already agreed broad outlines for new funding ideas, he said, including a tax on financial transactions, removal of VAT exemptions and streamlined systems of state aid.
Monti's high-level working group is due to present its findings at the end of the year, to be considered in time for revisions made to the budget expected in 2016.
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ECB to take the QE plunge this year…finally
Better late than never, right?
Despite the myriad political, legal and financial obstacles, the European Central Bank will this year take the plunge and start printing money, several years after its counterparts in the United States, Britain and Japan.
That’s the view of economists at BNP Paribas, one of the first major financial institutions to predict the ECB will use the printing press, the central bank weapon of last resort, to slay the dragon of deflation and steer the fragile economy away from recession once and for all:
Annual inflation in the euro zone is currently running at 0.7 percent. That’s well below the ECB’s target of “below, but close to, 2% over the medium term” and according to BNP Paribas “is likely to remain that way for a long time.” Many economists think it will fall even further – Goldman Sachs is penciling in just 0.4% for March.
Against that backdrop, BNP Paribas reckons the ECB will buy between €300 and €500 billion of bonds in the initial phase of its asset purchase or “quantitative easing” programme. This will probably commence in the second half of this year and be spread across private sector and government debt.
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German March Consumer Confidence At 7-Year High
Germany's consumer confidence is set to improve to a seven-year high in March, reflecting upbeat income expectations amid stable labor market development, a closely watched survey from the market research group GfK showed Wednesday.
The forward-looking consumer confidence index rose to 8.5 points from 8.3 points in February. The index was forecast to remain unchanged at February's originally score of 8.2.
The survey results, based on around 2,000 consumers, indicate that private consumption is playing a key role in economic growth. The market research group predicted 1.5 percent growth in total private consumption during 2014.
The largest Eurozone economy expanded 0.4 percent in the fourth quarter of 2013. Confounding expectations, detailed GDP data suggested no positive contribution to growth from domestic demand.
After five consecutive increases, economic expectations registered a moderate fall of 3.4 points to 31.9 in February, survey data showed.
In contrast to economic expectations, income expectations rose further in February, to 48.6 from 46.2. It improved slightly from the 13-year high of the previous month.
In view of the economic recovery and the extremely stable development on the labor market, consumers are assuming that there will be a greater increase in their incomes again this year.
Willingness to buy almost maintained its seven-year high of the previous month. The relevant index dropped slightly to 48.9 from 50.0 in January. Propensity to save also did not register any significant change.
According to GfK, consumers are still confident that the German economy has overcome its weak phase in the previous year and is entering a solid upswing.
In order to establish the upswing more sustainable, it is necessary to restart the investment engine, GfK said. Record low interest rates, gaining momentum in the global economy and lively domestic demand should boost the propensity of companies to invest.
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German jobless claims fall by 14,000 in February
The number of unemployed people in Germany fell for the third consecutive month in February, while the country’s jobless rate held steady, official data showed on Thursday.
In a report, Germany's Federal Statistics Office said the number of unemployed people declined by a seasonally adjusted 14,000 this month, better than expectations for a drop of 10,000. Jobless claims in January fell by 28,000.
The report showed that Germany’s unemployment held steady at 6.8% in February, in line with expectations.
Following the release of the data, the euro held on to losses against the U.S. dollar, with EUR/USD shedding 0.18% to trade at 1.3662.
Meanwhile, European stock markets remained mixed. The EURO STOXX 50 shed 0.2%, France’s CAC 40 added 0.15%, Germany's DAX fell 0.2%, while London’s FTSE 100 inched up 0.05%.
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The EURUSD is jumping very sharply from the 1.3640 support zone. The pair is likely to find resistance at around the 1.3720/30 zone. If the pair fails around the mentioned level, then we witness a down move again in the pair towards the 1.3660 level again. We should wait for some time now, and observe price action very carefully.
German Inflation Unexpectedly Slows In February
Germany's consumer price inflation eased in February, defying expectations of stability, preliminary figures from Destatis showed on Thursday.
The consumer price index rose 1.2 percent year-on-year in February, according to the flash estimate. Economists had expected the rate remain unchanged at January's 1.3 percent.
Inflation eased for a second straight month from December's 1.4 percent. The agency is set to release detail data on March 14.
Destatis blamed the low inflation rate on the second consecutive fall in energy prices. They decreased 2.7 percent, following a 1.8 percent decline in January.
Food prices are estimated to have risen 3.5 percent, slightly less than January's 3.6 percent gain.
The EU measure of inflation, the harmonized index of consumer prices or HICP, rose 1 percent annually in February. That is slower than January's 1.2 percent increase. Economists had forecast a 1.1 percent rise for February.
The HICP inflation is well below the European Central Bank's goal of keeping the rate 'below, but close to 2 percent'.
Month-on-month, the CPI rose 0.5 percent, almost reversing a 0.6 percent decline in the previous month. Economists were looking for a 0.6 percent increase.
The HICP also climbed 0.5 percent monthly, nearly erasing January's 0.7 percent slump. Economists had predicted a 0.7 percent gain.
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Euro-zone inflation rises to 0.8% – EUR/USD extends gains
Euro-zone headline CPI inflation was expected to remain unchanged at an annual level of 0.7% in February, in the initial release of CPI. Core inflation stood at 0.8% in January. Inflation releases from various countries pointed to a lower figure than 0.7% in the headline number. The publication is critical for the ECB rate decision next week. Will Mario Draghi set a negative deposit rate?
EUR/USD was making a move higher from 1.37 to 1.3730 towards the publication. — updates coming –
Germany reported a 1% year over year inflation rate according to the HICP, and this was certainly below expectations. Also Spanish CPI fell short. Italy and France are in a stagnation of prices. Italy releases its CPI numbers at the same time, and a y/y rise of 0.5% was expected after 0.2% last time.
In addition, the euro-zone released the unemployment rate for January, which was expected to remain unchanged at 12%.
Earlier, Germany surprised with a big rise of 2.5% in retail sales. On the other hand, report about a Russian invasion to the Ukraine weighed on the euro.
Support is at 1.3650 and resistance at 1.3773.
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Eurozone Inflation Steady At 0.8%; Unemployment Remains High
Eurozone inflation remained unchanged in February, lowering the pressure on the central bank to take action at the policy meeting next week to overcome fears of deflation.
Unemployment in the region held steady at an elevated level in January, despite economic recovery taking hold, official data revealed Friday.
Inflation came in at 0.8 percent for the third consecutive month in February, flash estimate from Eurostat showed. Inflation did not ease to 0.7 percent as expected by economists.
The figure has been staying below the European Central Bank's target of 'below, but close to 2 percent' for the thirteenth consecutive month.
The weakness in energy prices was the major component that take inflation to lower levels. Excluding energy, food, alcohol and tobacco, core inflation rose to 1 percent from 0.8 percent a month ago.
Stable consumer inflation and rising core inflation slightly eases pressure on the ECB to take further stimulative action as soon as its March policy meeting, IHS Global Insight's Chief European Economist Howard Archer said.
Much will likely depend on whether the ECB staff's new forecasts show Eurozone consumer price inflation still below 2 percent in 2016, Archer added. If the ECB does act, it will most likely be in the form of measures aimed at adding liquidity.
Nonetheless, Jonathan Loynes, chief European economist at Capital Economics expects either a small interest rate cut or possibly even some form of quantitative easing next week.
After the G20 meeting in Sydney last weekend, ECB President Mario Draghi said the bank is ready to act if the outlook for prices deteriorates, although he sees no fear of deflation in the euro area.
People are not postponing their expenditure with a view to buy the same thing at lower prices, Draghi said. The ECB will have the full set of information needed to decide whether to act or not by its next rate-setting meeting on March 6.
The European Commission this week lowered its euro area inflation projection for this year to 1 percent from 1.5 percent. The forecast for 2015 was trimmed to 1.3 percent from 1.4 percent.
Data today showed that energy prices declined deeply by 2.2 percent annually, while the cost of non-energy industrial goods and services rose 0.6 percent and 1.3 percent, respectively. More detailed version of prices will be released on February 24.
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EUR/USD Forecast March 3-7
EUR/USD had an excellent week, breaking the double top and reaching a 2 month high. Is this the beginning of a big rally or just a short lived move? Manufacturing and Services PMI’s, German Industrial Production and the all important rate decision are the highlights of this week. Here is an outlook on the major events and an updated technical analysis for EUR/USD, now on higher ground.Euro-zone inflation did not fall and remained at 0.8%, while core inflation even went up.
This key event for the ECB decision had a huge impact on the euro which rallied strongly. It wasn’t all good for the euro earlier in the week, as soft German inflation and the deterioration int he Ukraine and China hurt it, despite solid German business sentiment. In the US, the picture has improved after terrible data, especially with a jump in new home sales and an OK GDP release. And now, it’s time for the Draghi show.
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