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Euro Weakens to Five-Week Low as German Confidence Declines
The euro fell to a five-week low versus the dollar after a gauge of German investor confidence declined for a fifth month, fueling speculation the European Central Bank will take measures to boost the region’s economy.
The U.S. currency pared gains against the yen after a report showed retail sales rose in April less than forecast. The 18-nation currency weakened for a fifth day after the Wall Street Journal reported that Germany’s Bundesbank is willing to back stimulus measures from the ECB next month if staff forecasts show a lower 2016 inflation outlook.
“The euro is falling on a report that Weidmann is saying he’s ready to cut rates if needed,” said Manuel Oliveri, a currency strategist at Credit Agricole SA’s corporate and investment banking unit in London, referring to Bundesbank chief Jens Weidmann. “There’s a lot of focus on Weidmann because, as the Bundesbank president, he’s on the least dovish side when it comes to the ECB. This is supporting the notion that there’s a quite high probability of the ECB acting next month.”
The euro fell 0.3 percent to $1.3716 at 8:31 a.m. New York time after declining to $1.3699, the least since April 7. The yen was little changed at 102.16 per dollar after depreciating to 102.36, the weakest level since May 2. Japan’s currency strengthened 0.3 percent to 140.14 per euro.
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German Economic Sentiment Weakens In May
Germany's economic expectations worsened more-than-expected in May, a closely watched survey showed Tuesday.
The economic sentiment index fell to 33.1 in May from 43.2 in April, the Mannheim-based Centre for European Economic Research said. The score was forecast to fall to 40.
"Already, there are indications that Germany will not be able to maintain this fast pace of growth," ZEW President Clemens Fuest said. "Nevertheless, one can assume a positive underlying trend for the economic development for the year 2014."
On the other hand, the assessment of current economic situation rose 2.6 points to 62.1 in May. The reading was above the 60.5 level forecast by economists.
Economic expectations for the Eurozone also lost ground in May. The respective indicator declined by 6.0 points to 55.2. Meanwhile, the indicator for the current economic situation gained 4.9 points to -25.6 points in May.
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German April Inflation Rises As Initially Estimated
Germany's EU measure of inflation accelerated for the first time since December as initially estimated, final data from Destatis showed Wednesday.
The harmonized index of consumer prices advanced 1.1 percent year-on-year in April, following a 0.9 percent rise in March.
Meanwhile, the index slipped 0.3 percent on month, offsetting March's 0.3 percent rise. The statistical office confirmed April figures.
Inflation based on the consumer price index, eased to 1.3 percent in April, in line with expectations, from 1 percent in March. This was the first acceleration in inflation this year.
Month-on-month, consumer prices fell 0.2 percent versus 0.3 percent rise in March. The decline in April matched preliminary estimate published on April 29.
source
ECB sources say they are preparing a package of policy options for June meeting
Reuters citing sources close to the action, or lack of it. Not really mind blowing as one assumes they have to be ready if necessary given that’s all we’ve heard for months!
Industrial production down by 0.3% in euro area
In March 2014 compared with February 2014, seasonally adjusted industrial production1 fell by 0.3% in the euro area2 (EA18) and by 0.2% in the EU282, according to estimates from Eurostat, the statistical office of the European Union. In February 20143 industrial production rose by 0.2% and 0.3% respectively. In March 2014 compared with March 20134, industrial production dropped by 0.1% in the euro area and increased by 0.5% in the EU28. The decrease of 0.3% in industrial production in the euro area in March 2014, compared with February 2014, is due to production of intermediate goods falling by 0.8%, non-durable consumer goods by 0.5%, energy by 0.4% and capital goods by 0.3%, while durable consumer goods remained stable.
Euro zone Q1 GDP grows 0.2%, below forecasts for 0.4%
The euro zone’s economy grew less-than-expected in the first three months of the year, underlining concerns over the region’s economic outlook, official preliminary data showed on Thursday.
In a report, Eurostat said that the euro zone’s gross domestic product grew by a seasonally adjusted 0.2% in the first quarter, below expectations for growth of 0.4% and unchanged from growth of 0.2% in the preceding quarter.
Year-on-year, euro zone GDP increased at an annualized pace of 0.9% compared to a year earlier, below expectations for growth of 1.1% and after expanding at a rate of 0.5% in the previous quarter.
Following the release of the data, the euro held on to losses against the U.S. dollar, with EUR/USD shedding 0.31% to trade at 1.3673.
Meanwhile, European stock markets remained lower. The Euro Stoxx 50 declined 0.35%, France’s CAC 40 dipped 0.3%, London’s FTSE 100 shed 0.15%, while Germany's DAX slumped 0.25%.
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Eurozone Q1 Growth Misses Expectations
The euro area expanded at half the pace expected by economists in the first quarter as acceleration in German growth was not sufficient to counteract contractions in six other economies.
The weak growth figures from member countries amid fear of deflation adds further pressure on the European Central Bank to forge measures to stimulate the recovery.
Gross domestic product grew only 0.2 percent sequentially, the same rate as seen in the fourth quarter of 2013, flash estimates published by Eurostat showed Thursday. The growth rate was forecast to double to 0.4 percent.
On a yearly basis, the economy expanded at a faster pace of 0.9 percent, the fastest since the third quarter of 2011, after rising 0.5 percent. Nonetheless, it was weaker than economists' forecast for 1.1 percent growth.
Another report from Eurostat confirmed the 0.7 percent flash inflation estimate for April. This represented a pick up in inflation from a 52-month low of 0.5 percent recorded for March. Monthly inflation came in at 0.2 percent.
Inflation has been below the European Central Bank's target of 'below, but close to 2 percent' for the fifteenth consecutive month.
The disappointingly modest rise in GDP in the first quarter will have done little to reduce the risk of deflation in the region and the stark divergence between the major economies only adds to policymakers' problems, Jennifer McKeown, a senior European economist at Capital Economics said.
IHS Global Insight's Chief European Economist Howard Archer said the ECB will act at its June policy meeting to counter prolonged very low inflation, the strength of the euro amid disappointing GDP growth.
Among member nations of Eurozone, Germany and France exhibited diverging trends again, while six other economies posted declines in GDP.
Germany, the growth engine of the euro area, expanded at the fastest pace since early 2011. GDP growth doubled to 0.8 percent from 0.4 percent in the fourth quarter.
Elsewhere, the French economy unexpectedly was flat in the first quarter after expanding 0.2 percent at the end of 2013.
The Italian economy shrank in the first quarter, with GDP falling 0.1 percent after recovering from recession in the fourth quarter.
On the other hand, Spain's recovery gained further ground on private spending and exports. The economy expanded 0.4 percent, which was the fastest pace in six years.
Both Netherlands and Finland with coveted 'AAA' rating in the region shrank during three months to March period, with Dutch posting the biggest sequential fall in 18-nation bloc.
The Netherlands' economy slipped unexpectedly for the first time since early 2013. GDP declined 1.4 percent from the fourth quarter of 2013, when the economy grew 1 percent.
Finland landed in a recession at the start of the year. Finnish GDP slid 0.4 percent each in the first quarter and in the fourth quarter.
Portugal which is about to exit three-year EUR 78 billion bailout this week, shrank for the first time in a year, with GDP falling 0.7 percent from the fourth quarter.
Austria's sequential growth slowed marginally to 0.3 percent in the first quarter from 0.4 percent. Meanwhile, the neighboring Slovakia's growth gained momentum. GDP rose 0.6 percent sequentially, following 0.5 percent growth in the previous three months.
Estonia that joined the euro area in January 2011, contracted for the first time since the start of 2010. GDP was down 1.5 percent in the first quarter of 2014 from the same period of last year.
The Greek economy continued to contract, but the pace of decline was the slowest since the third quarter of 2008. GDP fell 1.1 percent annually.
Similarly, the downward trend in the Cypriot economy extended into the first quarter. GDP decreased 0.7 percent from the prior quarter, when it was down 0.8 percent.
Latvia's GDP grew 0.7 percent quarter-on-quarter, same as in the prior three months. Latvia became the 18th member of the Eurozone on January 1.
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EUR/USD holds steady, off 2-1/2 month lows
The euro held steady against the U.S. dollar on Friday, easing off two-and-a-half month lows although Thursday's disappointing economic growth data coupled with expectations for further easing by the European Central Bank continued to weigh.
EUR/USD hit 1.3720 during late Asian trade, the session high; the pair subsequently consolidated at 1.3713, inching up 0.01%.
The pair was likely to find support at 1.3648, Thursday's low and resistance at 1.3771, the high of May 13.
Sentiment on the single currency remained vulnerable after data on Thursday showed that the euro zone’s gross domestic product grew just 0.2% in the first quarter, compared to expectations for growth of 0.4%. On a year-over-year basis the bloc’s economy expanded 0.9%, falling short of expectations for growth of 1.1%.
A separate report showed that the bloc's annual rate of inflation was unchanged at 0.7% in April, in line with forecasts, but still well below the ECB's target of close to but just under 2%.
Meanwhile, demand for the greenback remained supported after a string of upbeat U.S. economic reports on Thursday, including jobless claims and manufacturing activity in New York and Philadelphia.
The euro was steady against the pound, with EUR/GBP easing up 0.01% to 0.8167.
Later in the day, the U.S. was to release data on building permits and housing starts, as well as a preliminary reading on consumer sentiment from the University of Michigan.
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Euro zone trade balance 15.2B vs. 17.3B forecast
The euro zone’s trade balance rose less-than-expected in the last quarter, official data showed on Friday.
In a report, Eurostat said that Euro zone trade balance rose to 15.2B, from 15.0B in the preceding quarter.
Analysts had expected Euro zone trade balance to rise to 17.3B in the last quarter.
Eurozone Trade Surplus Rises More Than Expected In March
Euro area foreign trade surplus rose more-than-expected in March from the previous month, figures from Eurostat showed Friday.
The trade surplus came in at a non-seasonally adjusted EUR 17.1 billion, which exceeded economists' expectations for EUR 16 billion. A year ago, the trade surplus was EUR 21.9 billion.
The February trade surplus was revised up to EUR 14.2 billion from EUR 13.6 billion.
Year-on-year, exports dropped 1 percent, while imports grew 2 percent.
In the first quarter, trade surplus rose to EUR 31.8 billion from EUR 26.8 billion a year ago. Exports increased 1 percent and imports were flat.
On a seasonally adjusted basis, exports declined 0.5 percent monthly in March, while imports dropped 0.6 percent.
The seasonally adjusted trade surplus rose to EUR 15.2 billion in March from EUR 15 billion in the previous month.