Eur/usd - page 20
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EUR/USD Mid-Day Outlook
EUR/USD gains on European manufacturing data
The euro firmed against the dollar on Thursday after better-than-expected euro zone manufacturing numbers bolstered the single currency by boosting spirits that better days await the European economy.
In U.S. trading on Thursday, EUR/USD was up 0.04% at 1.3360, up from a session low of 1.3298 and off from a high of 1.3371.
The pair was likely to find support at 1.3205, the low from Aug. 15, and resistance at 1.3452, Tuesday's high.
Manufacturing in the euro zone expanded at its fastest pace in 26 months in August.
London-based Markit Economics reported earlier that its flash euro zone manufacturing purchasing managers’ index rose to 51.3 in August from a final reading of 50.3 in July.
Analysts were expecting the index to come in at 50.8.
The flash euro zone services PMI rose to a 24-month high of 51.0 from 49.8 in July, better than market calls for a 50.2 reading.
The dollar, however, softened on U.S. jobs data.
The Department of Labor reported earlier that the number of individuals filing for initial jobless claims in the U.S. last week rose by 13,000 to 336,000, slightly higher than forecasts for 330,000.
While consensus is strong in the U.S. that the Federal Reserve will begin tapering its USD85 billion in monthly asset purchases this year, the timing of a start date remains up in the air.
While the weekly jobless claims number came in higher than expected, the figure still remained close to 6-year lows, which gave the dollar some support against the euro.
The euro, meanwhile, was up against the pound and up against the yen, with EUR/GBP trading up 0.48% at 0.8569 and EUR/JPY trading up 0.93% at 131.66.
On Friday, Germany will release economic growth data, while the U.S. will unveil new home sales.
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Considering that the whole attention is on the future behaviour of the Fed, the minutes of the Fomc represent a fundamental market mover for the next months.
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Germany's finances in black as growth picks up
Germany's finances are back in the black as growth rebounded in the second quarter, official data showed on Friday.
Germany ran up a general government surplus of 8.5 billion euros ($11.3 billion) in the first six months, equivalent to 0.6 percent of output, the national statistics Destatis calculated.
"When measured by the gross domestic product (of 1.3 trillion euros), this results in a ratio of 0.6 percent. The budgets of central government, state governments, local government and social security funds benefited from a generally good employment situation and a stable economic development in the first half of 2013 compared with other European countries," Destatis said in a statement.
At the same time, the statisticians confirmed a preliminary estimate that Europe's biggest economy expanded by 0.7 percent in the second quarter, powered by robust consumer and public spending, as well rising investment.
Private consumption grew by 0.5 percent, public spending was up 0.6 percent and gross capital formation or investment rose by 0.9 percent, Destatis calculated.
This was partly due to "weather-related catch-up effects following the unusually long and cold winter," the statistics office said.
In addition, 2.2 percent more goods and services were exported in the second quarter and imports were up by 2.0 percent.
"Consequently, the balance of exports and imports supported GDP, contributing 0.2 percentage points to growth," it said.
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Recent data show a partial recovery of the European economy that is favoring EurUsd. Anyway, the crisis that emerging countries are experiencing will require a devaluation of the Euro. So, the European trade balance data will be quite important.
EUR/USD gains on soft U.S. housing data
Disappointing data on new U.S. home sales sent the dollar weakening against the euro on Friday by keeping expectations alive by many that monetary policy in the U.S. will remain ultra-loose for the foreseeable future.
In U.S. trading on Friday, EUR/USD was up 0.32% at 1.3398, up from a session low of 1.3334 and off from a high of 1.3410.
The pair was likely to find support at 1.3298, Thursday's low, and resistance at 1.3452, Tuesday's high.
The Commerce Department reported earlier that new home sales in the U.S. dropped 13.4% to 394,000 units in July, far worse than market expectations for a 1.4% decline.
In June, new home sales rose 3.6% to 455,000 units.
The numbers kept expectations going that while the Federal Reserve remains ready to begin scaling back the pace of its USD85 billion in monthly asset purchases this year, a start date may come later such as in December as opposed to September.
Stimulus tools such as monthly bond purchases drive down interest rates to spur recovery, weakening the dollar in the process.
Fed officials have said they will pay close attention to economic indicators before deciding when to taper stimulus programs.
On Thursday, the Department of Labor reported the number of people filing for initial jobless claims last week rose by 13,000 to 336,000, a little higher than forecasts for 330,000, which helped soften the dollar in quiet trading.
Meanwhile in Europe, Germany's gross domestic product grew 0.7% in the second quarter from the first, in line with market expectations.
The euro, meanwhile, was up against the pound and up against the yen, with EUR/GBP trading up 0.34% at 0.8597 and EUR/JPY trading up 0.18% at 132.05.
Official data revealed that the U.K. gross domestic product grew by 0.7% in the second quarter from the first, beating expectations for a 0.6% expansion.
The U.K. Office for National Statistics said in a preliminary report earlier that business investment rose 0.9% in the second quarter, surpassing expectations for a 0.6% increase after a 1.9% contraction in the first quarter.
Data also showed that mortgage approvals in the U.K. rose by GBP37,200 in July after a GBP37,300 increase in June. Analysts had expected mortgage approvals to rise by GBP38,800 last month.
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Germany, Britain lead Europe's nascent economic recovery
Germany confirmed on Friday it had enjoyed its fastest rate of economic expansion in more than a year in the second quarter, and Britain revised up its growth to the same rate.
Although recession still haunts many of Europe's major economies, like Italy, Spain and the Netherlands, analysts said the German and British data showed that at least two of the region's major economic engines are moving into a higher gear.
Consumer morale has jumped to its highest level in two years this month, other data showed on Friday, in a bright sign for the current quarter as well.
Strong domestic demand drove a 0.7 percent quarterly increase in German gross domestic product in the second quarter, matching its growth rate in the first quarter of 2012.
Britain's economy expanded at the same rate as Germany's, equaling the growth it recorded in the third quarter of last year, fuelled by a broad-based pick-up in activity.
The signs of robust growth have also led to more upbeat comments from the region's central bankers, who have hitherto hinted at interest rates remaining low for some time to come.
The German figures reflected a construction flurry after a harsh winter, firms' strong appetite for machines and equipment and healthy private consumption.
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Europe Week Ahead: German Ifo, EZ HICP, -ESI
The Eurozone flash HICP inflation is expected to moderate to 1.4% YoY in August from 1.6% YoY in July owing to favourable base effects in energy inflation (energy bills in August this year increased by significantly less than over the same period last year). On the contrary, core inflation (excluding energy and unprocessed food) could edge up a little, from 1.3% YoY to 1.4% YoY. We see some downside risks to our HICP forecasts for August, while going forward, inflation in most Eurozone countries should remain capped (due to weak underlying demand) and volatile (due to seasonal factors and base effects). In the wake of stronger-than-expected flash PMIs, economic sentiment indices in the Eurozone will likely increase further in August.
The ESI is expected to improve for the fifth month in a row to close to 94.0, which would be its highest level since March 2012. Business confidence will likely improve both in the manufacturing and services sectors. The upturn of business confidence in the industrial sector during the past four months came along with a rebound in new orders and exports’ components, while inventories fell over the same period, suggesting that the positive growth momentum is based on healthy foundations. In the services sector all components of the index have been positively oriented since April with expected demand in particular rising to its highest level in more than a year. All in all, economic sentiment indices should confirm prospects of positive growth in Q3.
The increase in the German IFO index of business climate during the past four months has been relatively modest. We believe the IFO will bounce back more strongly in August given the surprisingly resilient PMIs and given that it still has a lot of upside potential before reaching its historical highs in 2011. The expectations index, which was roughly stable in July, will likely pick up in August (from 102.4 to close to 103.5), while strong hard data for Q2 will likely result in a large increase in the current conditions index as well (from 110.1 to 111.0). Therefore we think the jump in the IFO could exceed market expectations this month, fuelling optimistic expectations about the Eurozone growth outlook.
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ECB: Banks To Repay EUR 305 Mln Next Week
The European Central Bank said on Friday that banks that participated in the long-term refinancing operations will repay EUR 305 million next week.
This was the lowest amount since banks started paying back early this year.
Banks started early repayment of the first LTRO loans in January with the initial amount of EUR 137.2 billion.
The ECB carried out first LTRO in December 2011 and a second one in February 2012, giving out more than EUR 1 trillion in total, in a bid to avert a credit crunch as the euro area sovereign debt crisis unfolded.