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EUR/USD Stabilizes at 1.12 Following US Data Deluge

Market Place — Sat, 28 Feb 2015 10:00:22 +0000

The EUR/USD stabilizes to an intraday high of 1.1249 before falling sharply back toward the 1.12 handle. The pair was stabilized around 1.1208, advancing 0.1 percent. The EUR/USD faces initial support at 1.1127. A break below that level would lead to 1.1057. On the upside, resistance is ascending from 1.1324.

In economic data, German inflation showed signs of recovery in February after prices fell for the first time since 2009, a sign Europe’s largest economy was gradually regaining its footing amid rebounding oil prices.

Germany’s consumer price index rose at an annualized rate of 0.1 percent in February after plunging 0.4 percent at the start of the year, preliminary estimates revealed on Friday. However, the country’s harmonized index of consumer spending – the gauge used by the European Central Bank – remained in negative territory, declining 0.1 percent annually. The harmonized index had fallen at an annual rate of 0.5 percent in January.

Friday’s figures offer little hope that the broader euro area, comprising of 19 states including Germany, could avoid falling into a vicious cycle of deflation. Eurozone consumer prices fell 0.6 percent annually in January, the European Commission confirmed earlier this week, edging further away from the ECB’s target of just below 2 percent.

Plunging oil prices have squashed inflationary pressures throughout the advanced industrialized world, including the United States, which posted an annual inflation rate of -0.1 percent in January. That was the first time since October 2009 inflation had declined.

On Friday the Commerce Department said the US economy slowed more than initially estimated in the fourth quarter, stemming from a wider trade deficit and smaller inventory buildup. Gross domestic product expanded 2.2 percent annually in the fourth quarter, down from the “advance” estimate of 2.6 percent. However, the data set pointed to sustained growth in consumer spending, offering hope that the fourth quarter slowdown was only temporary.

Separately, US consumer confidence slipped in February, but remained close to January’s 11-year high. The Thomson Reuters/University of Michigan consumer sentiment index eased to 95.4 in February from 98.1 the previous month.

Rounding out Friday’s data releases was a housing report from the National Association of Realtors. Pending home sales, a forward looking indicator of US home sales, increased 1.7 percent in January to the highest level since August 2013, then EUR/USD stabilizes. The NAR expects existing home sales to reach a total of 5.26 million this year, up 6.4 percent from 2014.

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EUR/GBP at 7-Year Lows Ahead of Carney, Draghi Remarks

Market Place — Wed, 25 Feb 2015 12:10:42 +0000

The EUR/GBP sunk to fresh seven-year lows on Tuesday, as the beleaguered euro continued to struggle amid ongoing talks between Greece and its EU paymasters about Athens’ proposed four-month loan extension.

The EUR/GBP hit 0.7316 in Tuesday’s European session, a new seven-year low. The pair rebounded slightly in Wednesday’s Asian session and was trading at 0.7333. The pair’s next lifeline is at 0.7319. A break below that level would expose the 0.7300 handle. On the upside, initial resistance is likely found at 0.7354.

On Wednesday Bank of England Governor Mark Carney will testify before parliament’s Treasury Committee. Britain’s top central banker is expected to highlight the country’s steady economic growth over the past year, despite plunging inflation. Carney has stated before that inflation could fall below zero by the spring and that the BOE could cut interest rates further to prevent long-term deflation. According to the Bank’s latest inflation report, the consumer price index will average around zero in the middle of the year before rebounding toward the end of 2015.

Last year investors appeared certain that the BOE would be the first major central bank to begin lifting interest rates. Given Britain’s currency macroeconomic realities, analysts expect the BOE to hold off on raising interest rates until at least the beginning of 2016.

Meanwhile, European Central Bank President Mario Draghi will visit the European Parliament in Brussels on Wednesday, where he will participate in a Plenary Debate on the ECB’s 2013 Annual Report.

Eurozone inflation is forecast to fall at a near-record pace in February, stoking concerns about the long-term health of the currency region and whether quantitative easing would be enough to kick start the recovery. While Germany posted stronger than forecast GDP growth in the fourth quarter of last year, the bulk of the gains were attributed to a weakening euro and plunging energy prices.

The European Commission will release preliminary euro area CPI figures next Monday. The ECB’s Governing Council will coalesce next Wednesday and Thursday to discuss monetary policy and unveil new economic projections.

In January the ECB announced it would pump up to €1 trillion into the currency region over the next year-and-a-half to stave off deflation. The €60 trillion-a-month bond buying program was much larger than analysts had expected. The announcement brought the ECB closer into line with Bank of England and United States Federal Reserve, which unleashed their own bond buying programs following the 2008 financial crisis.

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EUR/USD Weekly Outlook

Market Place — Mon, 23 Feb 2015 09:03:52 +0000

The euro was trading cautiously on Monday, following a week of uncertainty that ended with Greece securing a short-term loan extension in exchange for further oversight from its creditors and other reforms that squashed Athens’ “anti-austerity” pledge. The attention this week shifts back to the economic data, although the threat of an eventual Greek exit from the Eurozone remains in the background.

The EUR/USD was trading at 1.1368 in the early Asian session, down 0.13 percent. The pair faces initial support at 1.1294 and resistance at 1.1445. The euro advanced slightly against its US counterpart last week, but ended on a sour note following the details of the Greek loan extension. The pair briefly fell below 1.13 on Friday before recovering.

Several batches of high profile data are on the docket this week, headlined by Germany. On Monday the IFO Institute will release the business climate index, a closely followed indicator for economic development in Germany. The business climate index is forecast to rise to 107.7 from 106.7, adding further evidence the German economy was regaining momentum following a midyear slump.

On Tuesday the Federal Statistics Office is expected to confirm Germany’s Q4 GDP growth at 0.7 percent, unchanged from the preliminary estimate. Year-on-year, this translates into an annualized gain of 1.6 percent. Fourth quarter growth more than doubled forecast and was a significant improvement over the third quarter’s 0.1 percent uptick.

Separately, Eurostat will post final Eurozone CPI figures for January. Eurozone consumer prices plunged 0.6 percent annually in January, the sharpest decline since July 2009, Eurostat reported last month in a preliminary estimate.

On Thursday Germany will publish official employment figures for February. The number of workers unemployed is forecast to drop by another 10,000 in February. The unemployment rate is forecast to hold at 6.5 percent.

Separately, Eurostat will release several economic indicators on Thursday, including business confidence, industrial confidence and economic sentiment.

Germany and other Eurozone member states will close out the week with preliminary estimates of February CPI. Germany’s harmonized index of consumer prices declined 0.5 percent in January, the first time in more than five years inflation turned negative for Europe’s largest economy.

Eurozone inflation will probably remain negative in the first half of the year before gradually recovering later on, aggravating concerns about the currency bloc’s nascent recovery. Persistently weak inflation also raises concerns about the ECB’s €1 trillion bond buying program, which has designed to shore up consumer prices and promote economic growth.

The ECB will hold its next monetary policy meetings in early March.

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EUR/USD Edges Higher Amid Greek Bailout Talks, Disappointing US Data

Market Place — Sat, 14 Feb 2015 07:00:10 +0000

The EUR/USD advanced for a second consecutive day on Friday as Greece resumed talks with its Troika of creditors, while the US dollar continued to retreat following disappointing retail sales data.

The EUR/USD climbed 0.12 percent to 1.1413, easing off an earlier high of 1.1445. The pair is pacing toward a weekly gain of 0.75 percent. Near-term support is likely found at 1.1325. On the upside, initial resistance is likely found at 1.1461. A break above this level would expose 1.15.

Talks between Greece and its international creditors resumed on Friday in an effort to keep the country financed after February 28, the deadline for the current bailout program. Eurozone finance ministers will hold a second round of talks on Monday. Negotiations broke down earlier this week after Greece and its Eurozone counterparts failed to establish common ground on a new agreement.

Meanwhile, a fresh wave of violence broke out in eastern Ukraine after European leaders agreed to a peace deal in Minsk earlier this week, as rebel forces and Ukrainian troops fought for control over the strategic town of Debaltseve.

Growing instability in Ukraine could dampen near-term support for the euro and other “riskier” assets, as investors opt for the security of safe-haven assets like gold and the Japanese yen.

In economic data, Eurozone GDP rose faster than forecast in the fourth quarter, generating cautious optimism about the region’s nascent recovery. Eurozone GDP rose 0.3 percent quarter-on-quarter and 0.9 percent annually, official data showed. The gains were spearheaded by Germany, which rebounded sharply in the fourth quarter, growing at an annual rate of 1.6 percent.

The struggling Greek economy contracted in the fourth quarter, declining 0.2 percent.

Meanwhile, US data continued to disappoint on Friday, as consumer confidence tumbled from January’s 11-year high. The Thomson Reuters/University of Michigan consumer sentiment index dipped to 93.6 in February from 98.1 in January. A median estimate of economists called for no change.

American consumers are concerned about rising oil prices and were generally less upbeat about the labour market after hearing about layoffs in the oil and gas sector. Consumers’ appraisal of the current situation declined to 103.1 from 109.3, while the barometer of future expectations decreased to 87.5 from 91.

The greenback was generally weaker across the board on Friday. The US dollar index declined further to 94.04, falling 0.05 percent. The index is down 1 point from Wednesday’s high of 95.09.

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USD/CAD Loses NFP-Inspired Rally amid Higher Energy Prices

Market Place — Wed, 11 Feb 2015 07:00:48 +0000

The North American currency pair back was on its heels Monday, as rebounding energy prices and better than expected Canadian housing starts supported the Canadian dollar.

The USD/CAD declined more than half a percent to 1.2454. Initial support is likely found at 1.2417 and resistance at 1.2589.

The pair rebounded on Friday after the United States Department of Labor said nonfarm payrolls rose by 257,000 in January, following upwardly revised gains of 429,000 and 329,000 in November and December, respectively. The unemployment rate edged up slightly to 5.7 percent from 5.6 percent as more people entered the workforce, while average earnings rose at the fastest rate in six years.

The stronger than forecast report sent the US dollar surging and supported expectations the Federal Reserve could signal for higher interest rates by midyear. Speculation about a midyear rate hike had cooled in recent months amid sluggish domestic growth and global volatility.

The loonie received a boost on Monday after the Canadian Mortgage and Housing Corporation reported stronger than forecast housing starts in January. Canadian housing starts rose to a seasonally adjusted annual rate of 187,300 in January, up from 177,600 in December and compared with expectations for 177,500.

Rebounding energy prices also helped shore up the Canadian dollar. Crude prices advanced for a third day, as West Texas Intermediate for March delivery rose $1.46 to $53.15 a barrel. Global benchmark Brent crude jumped 43 cents to $58.23 a barrel.

The USD/CAD faces further upside in the short- and medium-terms, as the market continue to price in a much lower Canadian dollar. The loonie’s prospects have been shattered over the last seven months, in part by declining commodity prices but also because of a weaker domestic economy. Canada’s gross domestic product is expected to increase just 1.5 percent in the year through June, according to the Bank of Canada’s said last month. That’s nearly 1 full percentage point below the Bank’s previous forecast.

The BOC joined a growing list of central banks to cut interest rates in January. The Bank reduced its target for the overnight rate by 25 basis points to 0.75 percent. That was the first rate adjustment since September 2010. According to analysts, the BOC could slash interest rates by another 25 basis points by midyear to cope with weak energy prices and deflationary pressures.

Canadian consumer prices declined 0.7 percent in January, as annual inflation slowed to 1.5 percent from 2 percent.

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EUR/USD Holds Ground as Political Tensions Escalate

Market Place — Tue, 10 Feb 2015 07:00:53 +0000

The euro was little changed against the US dollar on Monday, trading above 1.13 cents US ahead of the European Union meetings in Brussels. The meetings, which will be held on Wednesday, will be attended by newly appointed Greek Prime Minister Alexis Tspiras and German Chancellor Angela Merkel.

The EUR/USD climbed 0.06 percent to 1.1326. The pair is likely supported at 1.1259. Resistance is ascending from 1.1435.

Risk-off trading was the norm on Monday, as investors digested latest comments from the newly appointment Greek Prime Minister, who on Sunday outlined plans to dismantle the Troika’s “cruel” austerity plan. Tspiras said he would not extend Greece’s €240 billion bailout plan set to expire at the end of the month, setting the stage for a political standoff with the country’s European lenders.

European Commission President Jean-Claude Juncker fired back on Monday, telling Greece the supranational institution would not bow to its demands.

“Greece should not assume that the overall mood has so changed that the Eurozone will adopt Tspiras’ government program unconditionally,” Juncker said in Germany on Monday.

Tspiras’ far-left coalition swept to power last month on a platform of “anti-austerity,” promising voters to raise the minimum wage, cut taxes and negotiate a new bailout agreement with international creditors. The Syriza party secured 36 percent of the vote and 149 of 300 parliament seats.

Meanwhile, escalating violence in Ukraine continued to weigh on market sentiment, driving investors to safe haven assets like the Japanese yen and gold. At least 45 Ukrainian soldiers and 11 pro-Russia fighters have been killed in renewed violence in the eastern part of the country, prompting the EU to postpone Russia sanctions ahead of the Minsk summit. German Chancellor Angela Merkel arrived at the White House on Monday to meet with US President Barrack Obama around the issue of whether to arm the Ukrainian government against Russian separatists.

In economic data, Germany’s trade surplus widened more than forecast in December, capping off a record year for international trade and signaling that Europe’s largest economy was improving. Germany’s trade surplus reached €217 billion in 2014, shattering the previous record of €195.3 billion. The country posted a surplus of €21.8 billion in December, up from €18.3 billion in November and compared with the consensus forecast of €17.9 billion. Exports rose 3.4 percent, while imports declined 0.8 percent from November, official data showed. Economists forecast exports to rise only 1 percent in December.

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Euro rallies as technical trading outweighs German deflation

Market Place — Fri, 30 Jan 2015 07:00:38 +0000

The EUR/USD rallied on Thursday, as technical trading sent the pair higher amid mixed economic data from Germany.

The EUR/USD regained 1.13 and climbed to an intraday high of 1.1367. It would later consolidate at 1.1320 in the North American session, advancing 0.4 percent. Initial support is likely found at 1.1253 and resistance at 1.13355. The EUR/USD could sustain a larger rebound above the initial resistance test as the RSI climbs off oversold levels.

Technical trading supported the euro despite plunging German inflation, which highlighted even more so the downside risks facing the Eurozone economy. Germany’s consumer price index of goods and services declined more than forecast in January, plunging 0.3 percent annually.

Germany’s harmonized CPI rate, which calculates inflation using a method consistent throughout the European Union, declined 0.5 percent annually, the biggest drop in more than five years.

The European Central Bank last week joined a growing list of central banks that have eased monetary policy this month to account for deflationary risk. The ECB introduced its long-awaited quantitative easing program last Thursday, announcing it would begin buying government bonds worth €60 billion per month. The QE program, which is expected to last until at least September 2016, could inject up to €1 trillion into the Eurozone economy.

The EUR/USD plummeted to fresh 12-year lows following the news and risks further downside action as the markets brace for weaker inflation figures and diverging central bank policies between the ECB and United States Federal Reserve.

In a separate report today Germany said its unemployment rate fell in January to its lowest level in more than two decades, a sign Europe’s largest economy was gradually improving despite regional imbalances. Germany’s unemployment rate fell to 6.5 percent in January, down from 6.6 percent a month earlier. That was the lowest level since the reunification of East and West Germany in 1990.

An improving labour market and cheaper gas prices are lifting German consumer sentiment, according to GfK. The market research firm’s monthly consumer confidence index reached 9.3 in February, a 13-year high.

“Consumers are expecting the German economy to continue developing positively over the coming months,” GfK reported on Wednesday in a press release.

It added, “Falling energy prices will play a major role in this respect. Low energy prices combined with a considerable depreciation in the euro are acting as an economic stimulus and should boost not only exports, but also companies’ willingness to invest.”

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