Eur/usd - page 247
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EU Preview: Poker With People's Lives Continues in Greek Saga
April is likely to be a very busy month for Greece and its partners packed with talks, negotiations and fraying nerves. It is unlikely that any reform-for-cash deal will to be forged before the next scheduled Eurogroup (euro zone finance ministers) meeting scheduled for April 24.
There will probably be another Euro Working Group (EWG - euro zone finance ministries second in rank officials) session on Wednesday to work with Greek officials over the latest list of reform proposals submitted on last Wednesday.
Athens submitted a 26-page list of reform proposals, covering a wide range of issues including taxation, public sector, labor market and healthcare reforms, among others areas. The list also includes tax evasion measures, a new bad bank creation and privatisations worth €1.5 billion in 2015.
The document warns that there are "critical deficiencies" in the banking sector: "The Greek banking sector has been marred by clientelism, by too close a link with the mass media and the political systems (through the provision of loans on non-banking principles) and, lastly, by lending practices that were either too tight or too loose. The economic crisis has in addition created a vast amount of NPLs [non-performing loans] that impedes credit creation."
Therefore the Greek government proposed strategies of "broad and deep structural reforms aimed at ensuring financial stability, appropriate credit expansion and governance that constitutes a significant departure from suspect practices of the recent and not too recent past."
The plan reminds that "dealing with the very high levels of NPLs is a top priority for consolidating the banks and restarting the economy."
Payments due in April
Officials in cash-strapped Greece are probably scratching their heads when looking for ways how to cover looming payments this month including a payment to the International Monetary Fund (IMF) of about 360 million Special Drawing Rights (SDRs) or about €458 million due on April 9.
Apart from that, the Tsipras government has to roll over €1.4 billion of Treasury bills on April 14 and another €1 billion of T- bills on April 19.
Evens so, Athens denied German magazine Der Spiegel's reports that it would be unable to pay those €458 million to the IMF unless it receives some financial help from its creditors.
"There is no chance that Greece will not meet its obligations to the IMF on April 9,'' government spokesman Gabriel Sakellaridis said, adding that said that the administration "continues to specify reforms and hopes for positive outcome at a Eurogroup meeting."
A complex nature of any delay in payments to the IMF has been highlighted by The Open Europe think-tank in their analysis:
"One of the biggest problems for Greece is that it is still working with the Fund and relies on its sign off (as part of the ‘institutions’) to get its current review completed and therefore funding released. The response of the fund on the ground will therefore be important. Of course, the fund finds itself in a bit of a circular position. It is unlikely to get paid if it does not approve Greece’s review, but how can it approve the review if it is not getting paid?" the Open Europe noted.
Poker with people's lives
The fact that things have gone this far shows the urgent need for enacting a proper process of handling handle debt crises, Eric LeCompte, Executive Director of the religious debt relief organization Jubilee USA Network, said.
"We're watching a poker match between Greece, the IMF and the European Union. The stakes couldn't be higher with the lives of millions of ordinary people on the line," LeCompte wrote for British newspaper the Guardian.
"This is more proof that we need a global bankruptcy process with rules that are above board. We can't be playing poker with people's lives."
BoE policy decision
The Bank of England (BoE) will undoubtedly keep interest rates at 0.50% at its April policy meeting on Thursday, starting off an eighth year at this rate having originally brought down to this level in March 2009.
The minutes from the meetings of the BoE's Monetary Policy Committee (MPC) this year have clearly shown that policymakers are being cautious about tightening policy, partly due to the concerns that very low near-term inflation may very well translate into weaker wage settlements for this year.
In the March MPC minutes, policymakers argued that the outlook for labor costs remained defined by two opposing forces. One was that a lower jobless rate could push up inflation in the medium term, but on the other hand, significantly weak inflation may turn into lower inflation expectations and those could lead to suppressed wage growth.
In addition, it is also an uneven redistribution of wealth among the wider public and, at the same time, increased indebtedness of UK households that have been keeping the central bank very cautious about rising rates pre-maturely.
As of now, the BoE remains in its comfort zone by keeping the base interest rate at the record low. The central bank's persistently loose policy stance can partly be justified by the unexpectedly sharp decline in global commodity prices at the turn of the year, which has pushed UK inflation down to its record low of zero percent, with the medium-term outlook for inflation recently lowered on stronger sterling against the euro.
Moreover, "any interest rate hike could be delayed if there is prolonged political uncertainty after May’s general election and this has a dampening impact on economic activity, particularly business investment," Howard Archer, chief European & UK economist at IHS Economics & Country Risk, said in a note to clients on Friday.
March Services PMIs
A set of March final PMIs for the UK, Germany, France, Italy, Spain and the euro zone will be released on Tuesday, indicating the economic trends in the services sector in the euro zone.
The euro zone flash services PMI in March came at 54.3 and the same result is expected in the final print.
March's flash PMI for Germany's services sector activity recorded 55.3, a preliminary survey from Markit Economics revealed, with the indicator expected to hold in the final result.
Services PMI for March for the UK is expected to remain in expansion, following 56.7 reported a month ago.
According to the preliminary PMI reading, France's services remained in expansion territory at 52.8 and the final result is expected to confirm the flash result.
March's services PMI for Italy is also due on Wednesday. The sector has balanced for a long time at the edge between contraction and expansion, and came in at that level also in February.
Services PMI for Spain was at 56.2 in February and the indicator is expected to sit firmly in expansion territory in March, too.
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Spanish jobless claims fall by 60,200 in March
he number of unemployed people in Spain fell more than expected in March, easing concerns over the health of the euro zone’s fourth largest economy, official data showed on Monday.
In a report, Spain’s Employment Ministry said the number of unemployed people declined by a seasonally adjusted 60,200 last month, compared to expectations for a drop of 18,300. The number of unemployed people fell by 13,500 in February.
EUR/USD was trading at 1.0967 from around 1.0975 ahead of the release of the data, while EUR/GBP was at 0.7351 from 0.735 earlier.
EURUSD rose on Friday’s session but found enough selling pressure at a Fibonacci retracement level to turn around and close in the middle of the daily range. Stochastic is showing bullish momentum and is still above the 50 level.
We may expect an upward move toward a resistance zone at 1.1236 on a break above the Fibonacci level at 1.1034 (scenario 1) or a bounce from a Fibonacci level at 1.1034 could throw the pair back down to the upward trend line at 1.0845 (scenario 2).
Euro climbs above $1.10 on Dudley comments
The euro rose above the $1.10 level against the U.S. dollar on Monday, after comments made by New York Federal Reserve President William Dudley fuelled bets the Federal Reserve will hold off on raising interest rates until later this year.
EUR/USD hit a session high of 1.1026, the pair's strongest level since March 26, before pulling back slightly to trade at 1.1022 during U.S. morning hours, up 0.46%.
New York Fed President William Dudley said earlier that the timing of a future interest rate hike in the U.S. remains uncertain.
"The timing of normalization will be data dependent and remains uncertain because the future evolution of the economy cannot be fully anticipated," Dudley said in prepared remarks.
His comments came after weaker than expected U.S. employment data on Friday prompted investors to push back expectations for a rate hike in the U.S. to the end of the year.
The Labor Department said that the U.S. economy added just 126,000 new jobs in March, the smallest increase since December 2013 and sharply below forecasts for a gain of 245,000.
A slowing labor market could prompt Fed officials to reconsider a planned increase in interest rates. Last month the Fed indicated that the first rate increase could come as soon as June, but added that continued improvement in labor markets would be a key factor it would consider.
The single currency found further support amid hopes that Greece will repay the International Monetary Fund on time. Athens is on the hook for a roughly €450 million loan repayment to the IMF due this Thursday.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.25% to trade at 96.60.
Later in the day, the U.S. Institute of Supply Management is to release data on service sector activity as investors look for further indications on the strength of the economy and the future path of monetary policy.
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Can EUR/USD Rise After Weak NFP?
European banks are still out on holiday today, but most major markets are open and today’s reaction to Friday’s disappointing US jobs report shows that the market is pricing in a lower probability of a Fed rate hike in Q3: the dollar is holding near Friday’s lows, US stocks are pulling back over half a percent, U.S. 10-Year yields are still subdued at 1.85% and gold is surging by 20 points to 1220.
Interestingly though, today’s ISM Non-Manufacturing PMI report suggests that the NFP report may have overstated the weakness in the US labor market. The headline PMI report came out roughly in-line with expectations at 56.5, while the employment component remained relatively robust at 56.4; given the decent performance of this labor market indicator, we could see this month’s disappointing NFP report revised higher as we move through Q2.
Technical View: EUR/USD
Coming out of Easter weekend, it’s apropos that EUR/USD is on the verge of its own revival. After shedding over 3500 pips in less than a year, the world’s most widely-traded currency pair is seeing its largest rally since topping above 1.40. More to the point, the unit is on the verge of breaking above its 50-day MA and putting in its first meaningful higher high in eleven months.
For technical traders, the key level to watch this week is 1.1050, which represents the March high and the 50-day MA. If EUR/USD can break above that key barrier, a more substantial rally toward the 23.6% Fibonacci retracement of the entire collapse off 1.40 at 1.1300 could materialize as we move through April. Astute traders will note that the clear bullish divergences in both the MACD and RSI support this view. On the other hand, only a break back below last week’s low around 1.0700 would reinvigorate the downtrend, indicating that the bias is relatively neutral between 1.0700 and 1.1050.
Key Economic Data/News that May Impact EUR/USD This Week (all times GMT):
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the EUR is still struggling to break the psychological resistance 1.1000.
EURUSD drops as jobs fears allayed
The US dollar has been slowly getting back on its feet and as it hit fresh highs, it started a cascade on stops in EUR/USD and elsewhere. Expect the non-farm payrolls moves to be totally retraced.
Euro Flat Ahead of Services Sector Data
The European single currency held on to gains seen ahead of the Easter weekend, in reaction to disappointing US jobs data published on Friday that showed that US businesses added the fewest jobs to the economy in 16 months at the end of the first quarter.
The euro came off it's overnight peak of $1.0952 on Tuesday but ahead of the European open delivering set of services sector activity data it was trading flat at $1.0922. Compared to last Tuesday, the euro is more than 200 pips higher.
The US non-farm payrolls figure came out at 126,000, below market estimates of 245,000 and lower than last month's revised 264,000. The unemployment rate stayed at 5.5%, while average hourly earnings rose 0.3% on a monthly basis and rose 2.1% on a yearly basis.
"The reaction in the US dollar to what was a big slowdown in the US employment growth in March has actually been fairly sanguine. This could be as a result of a lot of empty desks in London but actually may reflect how committed the market is the story of strong-dollar. If this is the case, another test of the highs in the US dollar may be needed to test the metal of reinvigorated dollar bears," Jasper Lawler from CMC Markets UK wrote on Tuesday.
A slowdown in US hiring renewed the speculation of a later rate-hike, which boosted US stocks on Monday. However, a large amount of market participants still expect a mid-year rate hike, which helped maintain the US dollar's strength overall.
"We haven't changed our expectation of a mid-year U.S. FED rate hike but weak number we had on Friday certainly eschews risk towards more of a later rather than an earlier hike," ANZ wrote in a research note on Tuesday.
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EURUSD initially rose but found enough resistance at the 50-day moving average to turn around and close near the low of the day. The pair is being squeezed between the 10-day and the 50-day moving averages and on a break of either moving averages we may expect a sharp move in the direction of the break.
EUR/USD suffers post-Easter hangover – slips below 1.09
The Easter holiday is fully over. As European traders return to their desks after a long weekend, they seem to have second thoughts about the USD sell-off that followed the very disappointing US Non-Farm Payrolls.
EUR/USD slips down to 1.0870, basically erasing last week’s gains.
A gain of only 126K was bad news for the US dollar: the slowdown in the US economy could translate to a delay in the next rate hike. However, as time passed by, different lines of thought came across:
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