Eur/usd - page 38
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Merkel Left to Seek SPD Alliance After Greens Drop Out
German Chancellor Angela Merkel was left with the Social Democrats as her sole potential governing partner after the Greens party dropped out of coalition talks citing irreconcilable differences over tax policy.
Merkel and her Christian Democratic negotiators ended their meeting with Greens party leaders in the early hours today after failing to identify enough common ground for formal coalition talks. With the Greens sticking to their demands for tax rises to finance infrastructure and Merkel’s CDU unwilling to drop their rejection of tax increases, the talks broke up with no more meetings planned.
“There was some astonishing movement toward our position” from Merkel, Claudia Roth, the Greens co-leader, said on ZDF television. “But on the specifics of energy, the minimum wage and a citizen’s insurance, there was no movement and that’s why we said it’s no basis for us” to continue talks to form a government.
The Greens decision to drop out of the running to join Merkel’s third-term government after the Sept. 22 elections robs the chancellor of a bargaining chip in her negotiations with the main opposition Social Democrats. Merkel’s bloc is due to meet for a third round of discussions with the SPD tomorrow.
Merkel has said she wants to pick a party for formal coalition talks before the first post-election session of Germany’s lower house on Oct. 22. Before then, the SPD will hold a small convention on Oct. 20, when delegates can approve or reject formal coalition talks. The SPD has said that it will put any coalition agreement to a ballot of the full party membership.
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What The Third Greek Bailout Will Look Like
Mere weeks after the Merkel re-election, it will come as no surprise to anyone that Greece is to be bailed out for the third time. Germany's Die Zeit newspaper notes the government is assembling a Greek bailout plan which essentially has four gimmicks to fill the "high-single-digit-billion" budget shortfall. Despite having been told time and again that the worst is over, Greek Bailout III will entail shifting cash from the bank recap fund, Bill sales to specific banks which can be instantly collateralized with the ECB, possible extensions of credit by existing creditors, and reduction in interest rates on existing debt. Of course, we will be told that this is the last time and that Greece will emerge victorious in just 1 or 2 more years...but after a few weeks of epic strength, the Athens stock index is giving some back in the last 2 days.
Via Bloomberg,
German government is assembling Greek bailout plan involving shifting funds, ECB assistance, expanded credit and outstanding-debt reduction, Die Zeit newspaper reports, citing unidentified finance officials.
Seems to us that if the bank recap fund is greatly rotated into government funding then all that hot money flows into Greek banks may be a little caught offside?
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EUR/USD gains as market digests deal on U.S. fiscal impasse
The dollar held steady to lower against the euro on Wednesday as markets digested news that U.S. lawmakers have struck a spending deal needed to reopen the government and avoid throwing the country into default.
The U.S. is due to hit its debt ceiling on Thursday, after which Washington won't be able to guarantee all of its obligations.
In U.S. trading on Wednesday, EUR/USD was up 0.05% at 1.3532, up from a session low of 1.3474 and off from a high of 1.3567.
The pair was likely to find support at 1.3462, the low from Sept. 25 , and resistance at 1.3598, Monday's high.
Senate Majority Leader Harry Reid, a Democrat, and the Senate's top Republican, Mitch McConnell, said they agreed on a plan to end the fiscal impasse needed to reopen the government as well as extend Washington's borrowing authority to avoid defaults.
The dollar saw support on expectations that the House of Representatives may give the proposal the green light possibly today, though it didn't soar as markets were expecting a last-minute compromise similar to the debt-ceiling debates of 2011 and the fiscal cliff deal in late 2012.
U.S. credit ratings agency Fitch Ratings on Tuesday placed the U.S. 'AAA' debt on "rating watch negative" due to congressional inability to pass a spending package.
The budget deal will reportedly give the Treasury the authority to continue borrowing through Feb. 7 and fund the government through Jan. 15, but will also add in spending cuts, which appeased Republicans.
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Euro zone current account rises less-than-expected
The euro zone’s current account rose less-than-expected last month, industry data showed on Thursday.
In a report, European Central Bank said that Euro zone current account rose to a seasonally adjusted 17.4B, from 15.5B in the preceding month whose figure was revised down from 16.9B.
Analysts had expected Euro zone current account to rise to 17.7B last month.
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Euro Capitals Tighten Fiscal Leash as EU Polices Cuts
In Madrid, the government is paring spending on roads and rails. In Rome, state property is to be sold off. In The Hague, lawmakers agreed to the second set of extraordinary cuts in two years.
Even with the 17-nation euro area projecting economic expansion next year for the first time since 2011, policy makers are keeping a fiscal leash on growth by maintaining austerity policies born in the fight to save the euro.
That’s because for the first time officials in Brussels will get to review spending plans before they are approved by national parliaments. The European Commission, the European Union’s regulatory arm, was empowered to demand revisions in a bid to impose discipline and encourage coordination.
“The pressure to continue with austerity is unabated,” said Paul De Grauwe, a professor at the London School of Economics.
While there are no new penalties built into the system, the EU says that by pointing out flaws in the draft budgets that had to be submitted by Oct. 15, governments can mend their ways.
“Don’t underestimate the impact of the upcoming so-called two-pack,” EU President Herman Van Rompuy said on Oct. 2 in Brussels, referring to the two pieces of EU legislation that authorized the budget oversight. “It won’t make Brussels more popular in our capitals.”
Demands for rigor follow three years of euro-area cost-cutting that totaled 216.7 billion euros ($293 billion). That exceeds the size of the Greek economy.
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EUR/USD gains as market bets Fed to keep policy loose
The dollar moved to 8-month lows against the euro on Thursday as markets bet the Federal Reserve will keep ultra-loose policies in place to make sure a recent fiscal showdown that closed the government and nearly exposed the country to default won't hamper recovery.
In U.S. trading on Thursday, EUR/USD was up 0.93% at 1.3661, up from a session low of 1.3516 and off from a high of 1.3682.
The pair was likely to find support at 1.3474, Wednesday's low, and resistance at 1.3711, the high from Feb. 1.
The U.S. Congress passed a bill to reopen the government and raise the debt ceiling on Wednesday, just hours ahead of a deadline that would have opened the doors to possible sovereign debt defaults.
The deal will fund the government until Jan. 15 and raise the government borrowing limit until Feb. 7.
Both Republicans and Democrats also agreed to talks over broad budget issues in an attempt to reach a longer-term deal by Dec. 13.
Still, the dollar weakened on the news amid concerns that the 16-day shutdown and accompanying default fears took their toll on an already fragile economic recovery, which could prompt the Federal Reserve to delay plans for rolling back its stimulus program until early 2014.
The Fed is currently buying USD85 billion in Treasury holdings and mortgage debt a month to boost the economy, a monetary policy tool known as quantitative easing that drives down interest rates to spur recovery, weakening the dollar in the process.
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Think Tanks Downgrade German Growth Forecast
The German economy will likely grow at a significantly slower pace this year, contrary to earlier expectations for a modest improvement, revised estimates released by a group of the country's leading economic think tanks revealed Thursday.
The institutes, including Ifo, downgraded their 2013 growth forecast for the Germany economy to 0.4 percent from 0.8 percent estimated in April. The revised figure suggests a slowdown from last year's 0.7 percent growth. The downgrade mainly reflects the significant declines in production in the winter half year of 2012/2013.
For 2014, the experts continue to forecast a sharp pick in growth, but at a slightly slower rate of 1.8 percent than 1.9 percent projected in the previous report published in April.
Presenting the autumn forecast, the think tanks said that private consumption in the Europe's largest economy would continue to remain robust during the forecasting period, helped by rising employment and considerable increases in wages. The country's exports will be stimulated by a further upturn in the world economy.
The report, released jointly by the Ifo Institute, Berlin's DIW, the IW in Halle and Essen-based RWI, said the German economy is on the verge of an upturn driven by domestic demand and a strong pick up in investment, supported by the improving global economic climate and decreasing uncertainties.
The revised outlook for consumer price inflation is 1.7 percent for this year, which is higher than 1.6 percent estimated earlier. The inflation forecast for 2014 has been revised up to 1.9 percent from 1.8 percent.
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Norges Bank Survey: Credit Demand To Fall In Q4
Demand for loans from Norway's households and corporates are likely to fall in the fourth quarter, results of the Norges Bank's Survey of Bank Lending showed on Thursday.
Credit demand from households were lower-than-expected in the third quarter, the central bank survey said. Meanwhile, loan demand from non-financial enterprises showed a slight increase during the period.
Surveyed banks expect credit standards for corporates to ease in the fourth quarter, while those for households to remain largely unchanged. Credit standards for both households and corporates were unchanged in the third quarter.
Lending margins for households are expected to be lower in the third quarter, after a modest increase in the previous three months. After remaining unchanged in the third quarter, corporate lending margins are expected to be lower in the following three months.
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Spanish banks' bad loan ratio rises to 12.1 pct in August
Spanish banks' bad loans as a percentage of total lending rose slightly to 12.1 percent in August from 12 percent in July, marking a new high, Bank of Spain data showed on Friday.
The ratio has been steadily climbing in recent months as households and small companies struggle with debts, although at some banks bad debts grew more slowly in the second quarter.
Spain's economy is set to emerge from a two-year recession by the end of this year, although many analysts and bankers forecast that bad loans will peak in early 2014.
Bad debts rose by just over 2 billion euros ($2.7 billion)to 180.7 billion euros in August, the data showed.
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French Leading Index Rises For Second Month: Conference Board
A leading indicator of the French economy increased for the second successive month in August, and at a faster pace than in the previous month, data released by research firm Conference Board showed Friday.
The Conference Board Leading Economic Index advanced 0.6 percent month-on-month to 116.3 in August, after rising 0.3 percent in the previous month. In June, the index had recorded a 0.1 percent decrease.
The lift to the leading index came mainly from yield spread, new unemployment claims, stock price and industrial new orders, which was partially offset by negative contributions from residential building permits.
Meanwhile, the coincident economic index, which is the measure of the current economic situation, stayed unchanged at 104 for the second consecutive month in August.
During the six months ended August, the leading index increased 1.5 percent, while the coincident index stayed unchanged. The strengths among the leading indicators have become more widespread than the weaknesses in recent months, the agency said.
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