Eur/usd - page 138
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Against the tide: QE this year is inevitable
ECB president Mario Draghi has resisted using his quantitative easing bazooka up to now. However, with inflation expectations already moving lower, he will have to fire it before the year is out.
At its eagerly awaited meeting in June, the ECB finally grasped the nettle and took action to stop the eurozone economy slipping into a Japanese-style deflationary spiral.
The ECB board may not have launched its bazooka of quantitative easing by directly buying sovereign bonds. But its move to negative deposit rates and targeted long-term refinancing operations (TLTROs) for banks to lend on was a clear signal of intent, as were the repeated statements peppering the ECB’s press conference that it was "willing to do more".
Direct purchases of various asset-backed securities look a likely next step, though full-blown QE (buying sovereign debt) remains on the table, and the ECB will use it if there is any de-anchoring of inflation expectations. However, contrary to the ECB’s views, I reckon inflation expectations are already moving lower. So QE is inevitable before the year is out.
An OK appetiser
As expected, the ECB delivered a loosening of monetary policy (cutting the refinancing rate by 10 basis points to 0.15% and the deposit rate by 10bp to 0.1%). On top of this, it announced an expansion of its balance sheet via TLTROs. It has also evolved its preparatory work for outright ABS purchases, which looks to be the next easing lever it will pull. It might have shirked on delivering the main course of QE, but in sum it is an OK appetiser. QE is still in the arsenal, there to be deployed if conditions justify it.
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Switching back to the bearish trend was the right thing to do as bears once again rallied, pushing the pair to new lows underneath 1.3365.
Bearish is the way, but the risk of a bullish correction has increased with the presence of a bullish RSI divergence on the 4h and daily charts.
Only above 1.3450 do we see the trend as mixed.
good morning i think 1.33 will be tested soon
Italian Industrial Production 0.9% vs. 0.7% forecast
Italian industrial production rose more-than-expected last month, official data showed on Wednesday.
In a report, Istat said that Italian Industrial Production rose to 0.9%, from -1.2% in the preceding month.
Analysts had expected Italian Industrial Production to rise 0.7% last month.
Hi all,
I agree with the idea of the 1.33 next test for the long trend .
Cheers
Yesterday the EURUSD took another step lower and printed fresh year to date lows as the greenback strengthened following better-than-expected factory orders and ISM non-manufacturing PMI.
Now the million dollar question: How low can you go?
well the pair will go on droping till end of the week as long weak eur
Italy Recession, German Orders Signal Euro-Area Struggle
Italy unexpectedly returned to recession and German factory orders dropped the most since 2011 as political tensions and slowing global growth threaten the euro area’s recovery.
Italy’s economy shrank 0.2 percent in the second quarter after contracting 0.1 percent in the previous three months. German orders slid 3.2 percent in June from May. Both reports were worse than forecast by economists in separate Bloomberg News surveys.
The figures come on the eve of the European Central Bank’s August interest-rate meeting, two months after it announced an unprecedented package of stimulus measures including a negative deposit rate and targeted loans to banks. Those policies will take time to have an impact, leaving the economy at risk from a crisis in eastern Europe that is already undermining business and investor confidence.
“Today’s data are a serious reason for concern and confirm that the euro-area recovery is still sluggish at best,” said Joerg Kraemer, chief economist at Commerzbank AG in Frankfurt. “Evidence is mounting that risks to the ECB’s economic outlook are to the downside.”
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The EURUSD is at minimum of nine months.
With the weak German data to bring concerns about the recovery of the European Union, the 10-year German Bunds negotiate a positive trend and test highs.
In Italy, industrial production exceeded expectations (0.9% vs. Exp 0.7%).
However, the Italian GDP was much lower than expected (-0.2% vs. Exp 0.1%), causing more pressure on Europe.
Finland to seek compensation if Russia sanctions hit economy
Finland will seek compensation from the EU if sanctions imposed on Russia last week lead to an economic crisis in the country, Finnish Prime Minister Alexander Stubb said Wednesday.
"It is without doubt clear that, if sanctions hit Finland disproportionately, we will seek support from our European partners," Stubb said at a press conference.
"We have to stick to the principle of economic solidarity. In practice, this means that those member states most affected by the sanctions should also receive some form of compensation."
Stubb did not specify what type of compensation he would demand.
Finland struggled with recession in 2012 and 2013 and is already feeling the effects of weaker trade with neighbouring Russia since the beginning of the Ukrainian conflict.
The Bank of Finland estimates a three-percent fall in the Russian economy would shrink Finland's output by 0.5 percent.
"I dare say that there is a potential risk of -- and I stress that it is potential -- an economic crisis 2.0," Stubb said.
"The indirect impacts of the sanctions can be significant."
Finland's government is expected to present its budget for 2015 on Wednesday afternoon and Stubb said that the forecast would take into account possible effects of a weaker Russian economy.
The European Union announced broad economic sanctions against Russia last week.
That includes limiting access for Russian state-owned banks to Europe's financial markets, a ban on arms sales and curbing trade in sensitive technologies that will hit the oil sector, a key sector in the Russian economy.
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