Eur/usd - page 25
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Draghi Reveals ECB's Downward Bias, Close Watch On Money Market Rates
European Central Bank President Mario Draghi indicated on Thursday that the bank can reduce rates further if needed and it stands ready to act when necessary given the rising money market rates.
"Our monetary policy stance will remain accommodative for as long as necessary, in line with the forward guidance provided in July," Draghi said in his introductory statement presented in the post-decision press conference in Frankfurt.
"The Governing Council confirms that it expects the key ECB interest rates to remain at present or lower levels for an extended period of time," he reiterated. Asked why the bank is not tying its guidance to some specific indicator, he said the ECB's guidance is 'qualitative' and it is appropriate.
Earlier today, the 23-man Governing Council led by Draghi held the main refinancing rate unchanged at a record low 0.50 percent as expected for the fourth month. In May, the bank slashed the rate by quarter-basis points, which was the first rate cut in nine months.
Responding to questions from the press, Draghi said policymakers did discuss a rate cut in today's rate-setting session. Some policymakers said the economic recovery is "very green", while others said the current improvements in the economy does not justify a rate cut, he added.
Draghi pointed out that money markets have been influenced by a gradual reduction in excess liquidity. "Repayments of funds taken up in the context of the three-year longer-term refinancing operations reflect improvements in financial market confidence, some reduction in financial market fragmentation and the ongoing deleveraging by euro area banks," he said.
"We will remain particularly attentive to the implications that these developments may have for the stance of monetary policy."
He also told reporters that the central bank remains alert to the geopolitical risks that could arise from the conflict situation in Syria and is watching the financial market developments in emerging markets. Several emerging economy currencies have depreciated sharply after the U.S. Federal Reserve made its 'tapering' announcement in May.
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German Exports Unexpectedly Dropped in July in Uneven Rec
German exports (GRBTEXMM) unexpectedly fell in in July, even as a recovery gathered pace in the 17-nation euro area, its biggest trading partner.
Exports, adjusted for working days and seasonal changes, fell 1.1 percent from June, when they gained 0.6 percent, the Federal Statistics Office in Wiesbaden said today. Economists predicted an increase of 0.7 percent, according to the median forecast of 13 estimates in a Bloomberg News survey. Imports rose 0.5 percent.
The Bundesbank forecasts that the economy in Germany, which faces elections this month, should “normalize and stabilize” during the rest of the year after expanding 0.7 percent last quarter. The euro area exited its longest-ever recession in the period, and services and manufacturing grew at the fastest pace since June 2011 last month.
“It will be difficult to continue the very rapid pace of growth that we found in the past quarter,” said Hiroki Shimazu, senior market economist at SMBC Nikko Securities Inc in Tokyo. At the same time, “we’ve seen many signs of recovery, from the decrease in unemployment in Spain to good news out of Portugal,” he said.
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German Industrial Output Dropped in July After June Surge
German industrial production fell more than expected in July after surging in June, adding to signs that growth in Europe’s biggest economy is moderating.
Output, adjusted for seasonal swings, fell 1.7 percent from June, when it jumped a revised 2 percent, the Economy Ministry in Berlin said today. Economists forecast a decline of 0.5 percent, according to the median of 41 estimates in a Bloomberg News survey. Production slid 2.2 percent from a year earlier when adjusted for working days.
Industrial production in June, while revised lower, still gained the most since March 2012 as Germany led the euro area out of its longest-ever recession. The country, which is in the final weeks of an election campaign, is expected to see the economy “normalize and stabilize” in the remainder of the year, the Bundesbank said on Aug. 19. Exports unexpectedly dropped in July, separate data showed today.
“There was a very strong rise in the previous month and it can’t continue at that tempo, even if overall the outlook is positive,” said Heinrich Bayer, an economist at Deutsche Postbank AG in Bonn. “Growth in the German economy is really rather stable.”
German manufacturing output (GRIPIMOM) fell 2.1 percent in July, with production of investment goods sliding 3.4 percent, today’s report showed. Construction rose 2.7 percent, while energy output declined 2.9 percent.
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European stocks slip after Putin's Syria comments
European stock markets erased earlier gains in afternoon action on Friday, after Russian President Vladimir Putin reportedly said he would assist Syria if it suffers an external attack. The Russian leader said Russia will continue its arms sales and aid to Syria even if other countries launch a military strike against the Middle Eastearn nation, according to Dow Jones Newswires. The Stoxx Europe 600 index XX:SXXP -0.15% slipped 0.2% to 303.94.
Earlier in the day, the benchmark traded as high as 306.68 after weaker-than-expected jobs data from the U.S. increased speculation the Federal Reserve may delay its anticipated tapering of asset purchases. The U.K.'s FTSE 100 index UK:UKX -0.28% gave up 0.3% to 6,510.50, France's CAC 40 index FR:PX1 -0.03% lost 0.1% to 4,004.11 and Germany's DAX 30 index DX:DAX -0.20% slipped 0.2% to 8,218.88.
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EUR/USD gains as soft U.S. jobs report sparks dollar selloff
The dollar slumped against the euro on Friday after the U.S. August jobs report disappointed investors and clouded expectations for a Federal Reserve start date to begin tapering the pace of its asset purchases.
In U.S. trading on Friday, EUR/USD was up 0.35% at 1.31671, up from a session low of 1.3105 and off from a high of 1.3189.
The pair was likely to find support at 1.3068, the low from July 16, and resistance at 1.3223, Thursday's high.
The U.S. economy added 169,000 jobs in August, according to the Bureau of Labor Statistics, less than market calls for a 180,000 increase.
July 's figure was revised down to 104,000 from 162,000, while June's figure was revised down to 172,000 from 188,000.
The private sector added 152,000 jobs in August, well beneath expectations for a 180,000 rise
The U.S. unemployment rate fell to 7.3% in August, from 7.4% in July, as more people left the workforce. Analysts were expecting the unemployment rate to remain unchanged last month.
Soft German data, however, capped the euro's gains.
Germany reported that industrial production in Europe's largest economy contracted by 1.7% in July, well beyond expectations for a 0.5% fall after a downwardly revised 2% increase in June.
A separate report revealed that Germany's trade surplus narrowed unexpectedly to EUR14.5 billion in July from an upwardly revised June surplus of EUR15.8 billion. Analysts were expecting the trade surplus to expand to EUR16.1 billion in July.
Elsewhere, the euro was up against the pound and down against the yen, with EUR/GBP trading up 0.07% at 0.8422 and EUR/JPY trading down 0.78% at 130.32.
Official data released earlier revealed that U.K. manufacturing production rose 0.2% in July, missing expectations for a 0.3% rise after an upwardly revised 2% increase the previous month.
A separate report showed that the U.K. trade deficit widened to GBP9.85 billion in July, from a downwardly revised GBP8.17 billion deficit the previous month. Analysts had expected the trade deficit to narrow to GBP8.15 billion in July.
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Cyprus Q2 GDP Decline Worse Than Estimated
Cyprus' economy shrunk more than estimated earlier during the second quarter, latest figures from the Statistical Service revealed on Friday.
Gross domestic product fell a seasonally and working-day adjusted 1.8 percent from the first quarter, when it declined 1.7 percent. In a preliminary release on August 14, the agency reported 1.4 percent contraction during the second quarter.
The latest figures suggest that the Cypriot economy has sunk deeper into the recession that started in the third quarter of 2011.
Year-on-year, GDP fell 5.7 percent in the June quarter, which was worse than the 4.9 percent contraction seen in the first three months of the year. The second quarter shrinkage was earlier estimated at 5.2 percent.
On an unadjusted basis, the economy contracted 5.9 percent in the three months to June, faster than the March quarter's decline of 5 percent.
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Ireland Factory Output Tumbles In July
Ireland's manufacturing output dropped sharply in July, after a surge in the previous month, data from the Central Statistical Office showed on Friday.
Factory output declined 8.9 percent month-on-month, entirely wiping out June's 8.7 percent gain. The July drop was the biggest since September last year.
Year-on-year, manufacturing output fell 8.9 percent, after a 2.2 percent gain in the previous month.
Overall industrial production declined 8.7 percent from June, when it grew 9.3 percent. On an annual basis, production shrunk 7.6 percent, following 3 percent growth in June.
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Greek premier says economic pain will ease next year
Greece's economic pain will ease in 2014 as it exits a recession that will be less acute than forecast this year, helping the country meet its bailout targets, Prime Minister Antonis Samaras said on Saturday.
The country is struggling through a six-year slump that has shrunk its economy by more than a quarter, left more than one in four of the workforce jobless, pushed up poverty levels and shuttered thousands of businesses.
The European Union and International Monetary Fund, which have bailed the country out with two multi-billion euro rescue packages, project gross domestic product will shrink 4.2 percent this year after contracting 6.4 percent in 2012.
But Samaras, addressing an annual trade fair in Greece's second city of Thessaloniki, said the 2013 slump would be "smaller than forecast". He promised Greeks worn down by the country's worst post-war crisis a return to growth next year.
In a speech branded "delirious" by the leftist opposition Syriza party ahead of planned anti-austerity rallies in the city, Samaras said: "This year was the hardest, the most crucial, and it turned out to be the most successful.
"It was the hardest... because Greece paid for all the sins of the past".
In a sign the country's long slump may indeed be bottoming out, data this week showed the economy shrank 3.8 percent in the second quarter, helped by a rebound in tourism. That was the narrowest annual decline in nearly three years.
Greece's lenders expect a return to anemic growth of 0.6 percent in 2014 for an economy that has slumped 23 percent since 2008, while austerity measures have crippled private consumption and unemployment risen to 27 percent.
The lenders expect that rate to edge down to 26 percent next year, and economic growth to pick up faster after 2015.
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EUR/USD Forecast September 9-13
EUR/USD dropped for a second week in a row, due to the ECB’s cautious stance, among other things. Did the pair bottom out, or is there potential for more falls? Industrial and inflation data. Here is an outlook on the market-movers ahead and an updated technical analysis for EUR/USD.
ECB president Mario Draghi was “not enthusiastic” about the return to growth, remaining cautious about recovery and keeping monetary policy unchanged. Underlying price pressures in the Eurozone are expected to remain subdued over the medium term. However Draghi also noted the positive trend of GDP growth in the second quarter supporting a gradual recovery in the euro-area. In the US, the weak Non-Farm Payrolls cast a shadow over the chances of QE tapering in September.
*All times are GMT
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EUR/USD weekly outlook: September 9 - 13
The euro rebounded from seven-week lows against the dollar on Friday after data showing that the U.S. economy created fewer-than-expected jobs in August dampened expectations that the Federal Reserve will start to unwind its stimulus program later this month.
EUR/USD pulled away from 1.3103, the lowest since July 19, to settle at 1.3177, 0.47% higher for the day and paring the week’s losses to just 0.07%.
The pair is likely to find support at 1.3103, Friday’s low and resistance at 1.3226, the high of September 2.
The Department of Labor said the U.S. economy added 169,000 jobs in August, fewer than the 180,000 forecast by economists.
The unemployment rate ticked down to a four-and-a-half year low of 7.3% from 7.4% in July, but this was partially due to more people dropping out of the labor force.
The report also said that job growth in July was revised down to 104,000 from 162,000, while June’s figure was revised down to 172,000 from 188,000.
The disappointing data curbed expectations that the Fed will start to unwind its USD85 billion-a-month asset purchase program at its upcoming policy meeting on September 17-18.
Fed Chairman Ben Bernanke has said that the decision to begin tapering will depend on whether economic data is strong enough.
The European Central Bank left interest rates unchanged at a record low of 0.5% and announced no new stimulus measures following its monthly meeting on Thursday, in a widely expected decision.
The euro came under pressure after ECB President Mario Draghi reiterated that bank rates will stay at current or lower levels for "an extended period," despite recent signs of economic recovery in the euro zone.
Data on Monday showed that manufacturing activity in Spain and Italy returned to growth for the first time since 2011.
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