Eur/usd - page 65
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Euro Area Jobless Rate Lower Than Expected
he seasonally-adjusted unemployment rate for the 17-nation euro area in December 2013 was reported at 12 percent by Eurostat, the statistical office of the European Union, on Friday.
While the latest unemployment number is slightly higher than the 11.9 percent seen in December 2012, the data showed unemployment in the region has stabilized since October 2013. A Bloomberg poll had pegged the December 2013 unemployment rate at 12.1 percent.
In the 28-member European Union, or EU, the unemployment rate was 10.7 percent in December 2013, down from the 10.8 percent rate seen in November, and also in December 2012.
According to Eurostat estimates, 26.2 million people in the EU, of which 19.01 million were in the euro area, were without a job in December. But, the month saw 162,000 fewer people in the EU and 129,000 fewer people in the euro area go without a job, compared to the previous month. Compared with December 2012, unemployment had decreased by 173,000 in the EU, but increased by 130,000 in the euro area, according to Eurostat.
The lowest unemployment rates were recorded in Austria (4.9 percent), Germany (5.1 percent) and Luxembourg (6.2 percent), while the highest rates were seen in Greece (27.8 percent in October 2013) and Spain (25.8 percent).
In comparison, the Eurostat statement noted, the unemployment rate in the U.S. in December 2013 stood at 6.7 percent, down from 7 percent in November 2013 and from 7.9 percent in December 2012.
Meanwhile, annual inflation in the euro area in January fell to 0.7 percent from 0.8 percent in the previous month, a flash estimate from Eurostat showed Friday. It was at 2 percent in January 2013.
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Fall in eurozone inflation rate fuels deflation concerns
Calls for European Central Bank action to help protect the eurozone's fragile recovery have grown after the release of inflation and jobless data.
Official figures showed that eurozone inflation fell to 0.7% in January, down from 0.8% in December and further below the ECB's 2% target.
It has fuelled worries about whether the euro bloc could suffer deflation, potentially de-railing economic growth.
Separate data showed the unemployment rate in December was unchanged at 12%.
Downward spiral
The European Union's statistics agency, Eurostat, said that although there was a 1.7% rise in the cost of food, alcohol and tobacco in January, energy costs fell 1.2%.
Many economists had forecast the eurozone's inflation rate would rise slightly in January. The rate last touched 0.7% in October, which was the lowest reading for the 18-nation eurozone in almost four years.
Concerns about possible deflation - where the price of goods and assets are locked in long-term decline, hitting corporate profits, wage growth, and tempting consumers to delay purchases in the hope of further falls - have grown in recent months.
At last week's World Economic Forum, in Davos, Christine Lagarde, head of the International Monetary Fund, said eurozone inflation was "way below" target and that the risks to the bloc's fragile economic recovery should not be ignored.
Mario Draghi, president of the ECB, has said that although inflation was "subdued, and expected to remain subdued" for about two years, he was confident that it would return to target. But he added that the ECB was ready to act if necessary.
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Norway's Jobless Rate Rises In January
Norway's unemployment rate rose to 3 percent in January from 2.7 percent in the same period of last year, data released by labor and welfare agency NAV showed Friday. The rate came in line with economists' expectations.
At the end of January, around 80,100 persons registered as unemployed, up 8,600 from last January.
Data from Statistics Norway released this week showed that the jobless rate remained unchanged at 3.5 percent in November compared with August.
The unemployment rate has varied around 3.5 percent through most of 2013, the statistical office said.
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EUR/USD Forecast February 3-7
EUR/USD had a negative week, losing nearly 200 pips and uptrend support. The ECB rate decision is the main event of the week. Will the ECB give the euro another push down?Also German industrial production and PMIs will have an impact, among other events. These are the main highlights for this week. Here is an outlook on the major events and an updated technical analysis for EUR/USD.
The annual inflation rate in Germany dropped to 1.3% in January, Also the euro-zone inflation rate dropped again to the bottom of 0.7%. With the threat of deflation, will the ECB act now, or wait for March? On the upside, German employment market surprised with a sharp drop of 28,000 in the number of unemployed, beating forecast for a 5,000 fall. In the US, the Fed announced a second tapering and growth came out at a solid 3.2%, even though not all is rosy. What direction will we see now?
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Pressure building for ECB rate cut
Another interest rate cut in Europe could be just around the corner as the risk of deflation rears its ugly head again.
The first official estimate of eurozone inflation in January was a weaker-than-expected 0.7% -- the same level that prompted the European Central Bank to cut rates in November. Consumer prices rose by 0.8% in December.
The weaker January number "puts significant pressure on the ECB to take further stimulative action at its February policy meeting next Thursday," said IHS Insight's chief European economist Howard Archer.
Cheaper energy was largely to blame, but the stronger euro has also been pulling import prices down, economists said.
Europe is slowly recovering from the recession triggered by its debt crisis. The International Monetary Fund expects the 18-nation eurozone economy to grow by 1% percent in 2014, after shrinking by an estimated 0.4% last year.
But unemployment remains stuck at a record high of 12%, with businesses reluctant or unable to invest. Lending to households and companies is very weak, partly because the region's banks have yet to regain full health.
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EUR/USD weekly outlook: February 3 - 7
The dollar rose to 10-week highs against the euro on Friday as a slowdown in the annual rate of euro zone inflation in January fuelled fears over the threat of deflation in the euro area.
EUR/USD hit 1.3478, the weakest since November 22 and was last down 0.49% to 1.3488. For the week, the pair lost 1.35%.
The annual rate of euro zone inflation slowed to 0.7% in January, Eurostat said, after a 0.8% gain in December. Analysts had expected the inflation rate to tick up to 0.9%.
It was the fourth consecutive month the inflation rate came in at less than 1% and was well below the ECB’s target of 2%. The ECB unexpectedly cut rates to a record low 0.25% when inflation fell to a four-year low of 0.7% in October.
A separate report showed that the rate of unemployment in the euro zone was unchanged at 12% in December for the third successive month.
The common currency fell to two-month lows against the yen, with EUR/JPY dropping 1.07% to 137.75, extending the months losses to 1.89%.
Demand for the dollar was also underpinned as the selloff in emerging markets prompted a broad based flight to safety on Friday, with investors fleeing equities, bonds and currencies perceived as risky.
Emerging markets have been hard hit by a combination of concerns over the impact of cuts to the Federal Reserve’s stimulus program and fears over a possible slowdown in China. The Turkish lira and the South African rand tumbled after surprise rate hikes did little to shore up the currencies.
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Third Greek Bailout Package Is Finally On Deck
As noted on Friday, the Greek soap opera, in which Europe pretends to bail out Greece when it is just bailing out its insolvent banks by not touching the status quo, and Greece pretends to reform and comply with austerity reforms when it merely continues to spend as before until the money runs out and the entire act is repeated, is about to enter its third act.
Yesterday, Greek Kathimerini reported that the reason why the Troika has put Greece on ice and has is behind in the implementation of 153 actions demanded by its lenders, according to a timetable compiled by the Finance Ministry. "Of the outstanding actions, 57 are the responsibility of the Finance Ministry, 17 fall to the Development Ministry, another 17 to the Labor Ministry and eight to the Administrative Reform Ministry. The rest are divided among other ministries. A number of the actions have yet to be completed as the government remains in discussions with the troika about the measures. Inspectors are expected to return to Athens later this month but a date has not yet been fixed." In other words, the bulk of the conditions agreed to as part of the second bailout have yet to be met by Greece.
So what happens next? Why a third Greek bailout of course.
As reported by Spiegel over the weekend, citing a five-page German finance ministry 'position paper', Schauble is preparing the ground for a third aid package for Greece that would amount to €10-20 billion. When will the package be deployed? By May. Because that's when the European elections take place and when the next major Greek debt redemption takes place: after all can't have even the tiniest gust of wind blow on Europe's impecable house of cards...
From Kathimerini:
That said, by now nobody cares as pretty much everyone has figured out the game, which will continue on its unsustainable path until one day it no longer can.
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Czech Factory PMI Strongest Since 2011
Czech manufacturing growth increased in January, driven by strong gains in output and new business, survey data from Markit Economics showed on Monday.
The headline HSBC Czech Republic Manufacturing Purchasing Managers' index rose to 55.9 in January. The score was the strongest since May 2011.
New orders grew for the eighth straight month and at the fastest pace since April 2011. New export orders rose at the strongest pace since mid-2010, helped by strong demand from EU, especially Germany.
Manufacturers' purchases were the strongest in nearly three years and stocks grew for the sixth month. Employment grew modestly during the month.
Meanwhile, a weak koruna kept cost pressures higher in January. Input price inflation was the second highest since May 2011 and above average. Output prices rose for the fourth consecutive month.
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Draghi Said to Seek German Support on Bond Sterilization
European Central Bank President Mario Draghi would only consider ending the sterilization of crisis-era bond purchases if he’s openly backed by the Bundesbank, according to two euro-area central bank officials familiar with the debate.
Ending the liquidity drain would add almost 180 billion euros ($243 billion) to the euro-area financial system at a time when officials are trying to curb volatility in money markets and official interest rates are close to zero.
Draghi said he would contemplate asking ECB policy makers to halt the absorption of liquidity from the now-terminated Securities Markets Program if the Bundesbank helps sell the move to the German public, the people said, asking not to be identified because the deliberations are private. Sterilizing bond purchases typically neutralizes their impact on money supply, curbing inflation risks.
Enlisting the Bundesbank to convince the German public of a change in the terms of the SMP may be Draghi’s defense strategy against the kind of backlash his predecessor Jean-Claude Trichet experienced when he announced the program in 2010. Then-Bundesbank President Axel Weber criticized the measure on the same day, saying it posed “significant” risks.
A spokesman for the ECB declined to comment yesterday. The Bundesbank supports ending the liquidity absorption and has deliberated on the measure in the ECB’s monetary-policy and market-operations committees, a central-bank official told Bloomberg on Jan. 31.
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3 reasons European Central Bank may cut rates
he European Central Bank meets Thursday facing the loudest calls to boost the economy since it last cut interest rates in November.
Last month, the ECB held rates at their record low of 0.25%. But President Mario Draghi warned then it was premature to declare victory in the eurozone crisis, and he promised to use all the tools at his disposal if necessary -- a pledge he repeated 10 days ago.
Economists are divided over whether the ECB will go on the offensive Thursday. Some believe the bank is likely to wait for updated growth and inflation forecasts in March. Others say the time has come. Here's what the ECB is contending with:
1. The risk of deflation
Inflation is slowing in the eurozone, raising the risk of a slide into deflation and stagnation for an economy that is barely growing and still not generating jobs fast enough to bring down unemployment.
Consumer prices rose by just 0.7% in January, weaker than expected and down on December's number. Inflation has now fallen back to where it was when the ECB cut rates in November, and is less than half the central bank's target level.
Draghi has played down the risk of deflation, but the IMF and others have expressed concern that weak prices mean there's little cushion should Europe experience a shock to the system.
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