The euro continued to move higher throughout friday, but remained well within its recent range, while global equities advanced as euro zone optimism picks up ahead of the weekend. While the timing of a Spanish bailout remains highly uncertain, there is growing consensus that an aid request it is more likely than not after S&P downgraded Spain’s rating on Thursday. As such a request would trigger ECB bond buying program and lead to a further reduction in the euro zone bond yields, it could at least a near-term boost to the euro and most risk-sensitive assets.
Meanwhile in the US, a report showed producer prices grew less than expected in September, leaving the Federal Reserve room to continue its USD-weakening QE program
Above, must be able to penetrate EURUSD 1.2990 to continue the rising trend, while below 1.2922 will determine, whether the pair will be back under the 1.2900 area
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EUR/USD back down as investors continued to worry about the condition of Greece and Spain and the EU situation that does not seem able to cope with everything. Most of the global economies are pointing towards the EU as the overall factor weighing down their economy. The IMF revisions in growth shows the contagion affects around the globe Caused by the ongoing EU dilemma. No matter how much the government stimulus around the globe approve, without a turnaround in Europe, it will be just good money after bad. China will not be Able to pull out of its slump unless the EU begins to order goods and the U.S. will not be Able to see earnings and growth, while the EU sucks down the profits of global companies.
Spanish bond yields rose after euro zone Finance Ministers said on Monday that Madrid do not need a bailout, adding to uncertainty about when the country will ask for aid, Widely seen as inevitable.
Concerns about Greece issue also resurfaced after the European Central Bank chief Mario Draghi told the European Parliament Committee that Greece has made progress on reforming its economy, but has more work to do.
Adding to the negative sentiment, the IMF cut its global growth forecasts for the second time since April and U.S. and European policymakers warned that failure to fix their economic ills would Prolong the slump
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The euro got beat up in yesterday's trading as risk aversion dominated market sentiment. It finished 56 pips lower against the dollar at 1.2971 and suffered an 88-pip loss to the yen at 101.61.
Skepticism over Spain's balance sheets continued to haunt the euro. EU finance ministers met yesterday and they reiterated that the country doesn't need a bailout. With a major bond auction coming up at the end of the month, investors are worried if Spain could find enough demand at relatively low yields for its bonds.
Heck, market junkies are so worried about the fourth largest economy in the euro zone, they shrugged off the official inauguration of the ESM. Yup, you read that right. The permanent rescue fund is now operational with a financial capacity of 200 billion EUR to replace the EFSF.
Of course, it didn't help that mixed economic data hit headlines too.
Although Germany reported a much smaller contraction at 0.5% of its industrial production for August versus the -0.7% forecast, the Sentix Investor Confidence index fell short of expectations. The figure for October printed at -22.2 indicating that investors are more pessimistic about economic conditions in the euro zone that analysts predicted with the consensus just at -20.6.
Our forex calendar is blank for top-tier data from the euro zone today. However, with the ECOFIN meetings still ongoing and ECB President Mario Draghi scheduled to speak later (7:30 am GMT), keep an ear out for updates regarding Spain! I have a feeling that more denials about the country's need for a bailout would only do more harm than good to the euro.
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The International Monetary Fund has cut its global growth forecasts for this year and 2013, a German newspaper said on Friday. Citing excerpts from the IMF’s World Economic Washington-based body predicted world economic growth of 3.3 percent in 2012 and 3.6 percent in 2013.
The week ahead is comparatively light in terms of economic data releases while there are certain important events pertaining especially to Euro Zone and sentiments are likely to be centered around these events. To start with, Euro Area finance ministers will be meeting in Luxembourg today and tomorrow and investors will be looking out for cues on Spanish bailout and issues between Greece and troika of IMF, European Commission and ECB. In the meeting, the ministers are expected to launch their 500 billion euro permanent bailout fund to support distresses euro zone nations. ECB’s Draghi will be speaking at European Parliament Panel on Tuesday and this event will be highly watched out for his comments as he had earlier announced that the outright monetary transactions program was ready for immediate use. Also, German Chancellor visiting Greece on Tuesday and G7 meeting on Thursday are the other important events. Among the economic data, US trade balance and PPI on Thursday apart from the weekly jobless data will be in focus. Earlier today, the German trade balance released showed an unexpected rise in exports in August while industrial production contracted 0.5 per cent from 1.3 per cent in July.
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The trading week, dominated by contradictory reports concerning the Spanish bailout, ends with European markets in the green, after the sentiment was boosted on Thursday by ECB's announcement that its bond-buying program could be activated whenever needed. Following the release of the solid US NFP data for September EUR/USD broke above the 1.3030 level.
Samaras and Merkel to meet in Athens next Tuesday
German Chancellor Angela Merkel will travel to Greece on October 9 to hold talks with PM Anotnis Samaras. This is the first time since the onset of the crisis that the German leader will visit Athens. Greek labor unions are planning a rally outside the parliament on Tuesday to demonstrate their opposition towards the visit
Earlier on Friday Samaras warned that Greece was running out of funds and that it was crucial for the country to receive the next tranche of the bailout money before the end of November, in order to prevent it from defaulting on its debts. On Saturday the Greek government will meet with Troika inspectors for the last time before the October 8 EcoFin meeting, in an attempt to reach an agreement on the remaining 2 billion euros of austerity measures.
"The troika is demanding above all further cuts to pensions and wages. That is very difficult, because we are already bleeding," Samaras said in an interview for the German daily Handelsblatt. "The existing cuts already go to the bone. We are at the limit of what we can expect of our population."
Eurogroup considers Spanish bailout unnecessary
A EU official told reporters on Friday that Spanish banks would not be recapitalized through the ESM this year and that the exact timing of the procedure was not known yet. He added that the Eurogroup also did not see the need for a complete Spanish bailout such as those granted to Greece, Ireland or Portugal.
The official said that the results of the latest Spanish debt auctions were satisfactory and that the situation on the financial markets improved considerably over the last six months. Eurozone finance ministers, who will hold a meeting on October 8, will discuss the situation in Spain, but they do not expect that Mariano Rajoy's government will ask for the activation of the ESM.
These declarations further contradict rumors of an imminent request for a Spanish bailout, which have been circulating in recent days. On Tuesday Mariano Rajoy said that such a request would not be made in the nearest future while on Thursday night Finance Minister Luis de Guindos denied that Spain needs a bailout at all.
Spanish FinMin denies that Spain needs a bailout
During a lecture at the London School of Economics Spanish Finance Minister Luis de Guindos told the audience that Spain does not need a bailout, despite the increasing rumors that the country might officially ask for aid as soon as this weekend. He said that what the country really needs is ECB's intervention on the secondary market of government bonds under certain conditions.
Referring to the harsh austerity measures, introduced recently by the Spanish government and triggering violent protests in Madrid Luis de Guindos assured that “what we are doing is what we think is the correct thing not only for Spain but for the future of the Eurozone."
During Luis de Guindos's speech a group of young Spaniards protested by displaying placards with the inscription “Spain for Sale.”
Source:- fxstreet
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EUR/USD flying after a statement from Draghi and
touch area of 1.3 as predicted yesterday. Draghi, in a news conference, vowed to preserve the euro zone's monetary system and its currency.
ECB decides to not change its main refinancing rate at 0.75%. The press conference was where all the action was, and it's difficult to imagine what new can be said as the ECB observes that Spanish politics are hindering Spain's interest in applying for aid that would trigger conditional ECB bond buying. A recent article may have it right stating "it's not clear that the ECB will be Able to rescue Spain even should it apply for aid, in light of the regional elections that will Conjure the risks to revenue sharing and political stability all the while as Spain risks missing near-term fiscal targets and higher capital requirements than its recent state-sponsored stress tests indicated. "
Meanwhile, U.S. initial jobless claims showed an increase to 367,000, which means an increase of 4,000. The number came a day ahead of the NFP report roomates for months has greatly affected commodity and currency prices. With the Federal Reserve's implementation of the open-ended quantitative easing, though, that unemployment number may have Affect today.
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EUR/USD slightly stronger, thanks to lower Spanish bond yields as rumors circle that Spain is going request aid imminently. In addition, higher than expected Euro PPI suggest that there is ongoing inflationary pressure in the European system, which limits the ECB’s ability to cut interest rates. Today Spain released disappointing labor stats, with unemployment rising by 80k in September. The most important upcoming events for EUR traders are: Thursday’s ECB meeting and Friday’s NFP.
Markets are adding risk to portfolios putting some upward pressures on equities and commodities and downward pressure on the USD. News flow has been quiet, with most of the headlines focused on the RBA decision to cut interest rates by 25bpts. Yesterday’s stronger than expected US ISM is encouraging; however for markets the key inputs will come from tomorrow’s US election debate.
Yesterday’s speech by Chair Bernanke contained no market relevant new information and instead defended QE and suggested that the Fed was in no way monetizing debt.
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EUR/USD had a very quick turnaround following the release of U.S. PMI Manufacturing report. Now, this pair has bounces back down to almost 50% from the rise yesterday. The initial target for 1.2931 which is still above the upper limit of the channel to be pierced.
Spain and whether it is going to finally make a formal request for European bailout money continues to the hot topic. While this news has encouraged traders to pare their positions, the weakness has been orderly. Usually this indicates that traders have long been exiting their fresh short positions rather than entering the market.
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EUR/USD has experienced a significant weakening in the area yesterday, it was reinforced by fears of market participants to the conditions prevailing in Spain.
Current headlines are important; however are adding substantially to the general noise. What is important for EUR is:
1) The ECB has Decreased tail risk of an EMU breakup through the OMT,
2) Europe has Decreased the tail risk of a banking sector collapse through progress towards a banking union;
3) the key drivers in the near-term are central bank policy and the growth outlook. We have updated our EUR forecast to reflect this; increasing our targets for Q412 to 1:26 and leaving our targets for Q413 unchanged at 1:21 The next major event is the ECB on October 4th; however today's expected Spanish update from Moody's as well as the release of the Spanish bank stress tests could provide a knee-jerk reaction in EUR.
So the real crucial area is go round in early trade at the beginning of the month of October which was also initiated last quarter of this year. Many things that would make the road a bit bumpy at the beginning of this week, so ... traders ... let us count the risks we have :)
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EUR/USD finally closed just above its opening price of yesterday, in Greece there is growing speculation that the IMF, the EU and the ECB take the brunt of the concessions in the aid package of the country.
Risk events continues to be a major cause of the financial markets, however, reiterate that today and the future events are important, but are more used to create noise, while the week coming ECB (4 October) and non-farm payroll (October 5) release is major drivers.
Event risk continues to be an important driver of financial markets; however we re-iterate that today and tomorrow's events are important but serve more to create noise; whereas next week's ECB (October 4th) and non-farm payrolls release (October 5) will prove more important drivers.
Market dreary mood was seen ahead of the Spain's budget announcement, roomates could help pave the way for a bailout request and could implement more austerity measures amid mounting apprehensions in the country. Also, series of downbeat growth numbers out of the major economies of the world is also baffling investor sentiments. With the sluggish U.S. economy and the Fed's recent sounding pessimistic over economic activities, the annualized growth figures today could signify the current state of the economy. Also, shoring up the sentiments over the weekend ahead of a weeklong Chinese holiday, would be the manufacturing figures from largest metal consumer, derailing amid China growth story in the nation. In the wake of modest economic data, it remains to be seen if the Chinese central bank do any surprise sprung by boosting liquidity in coming days. On the whole, week's moves could remain engulfed to cues out of the U.S. and Europe.
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EUR/USD fell again today,
although as was previously thought, that after a disappointing New Homes Sales report from the U.S.. Sales were expected to print at 380K and markets were confident that the forecast would be positive, instead the final report Showed only 373K.
Today, the release of the joint German, Finnish and Dutch statement on the ESM combined with news that Spanish GDP will be far lower than expected helped push EURUSD below 1.29. This was Followed by the release of disappointing Italian retail sales (falling -0.2% m / m and 3.2% y / y) and ongoing fears that Greece will fail to meet the Troika's demands, roomates Provided the catalyst for the final leg lower in EUR .
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EUR/USD decline halted, along with market sentiment positive welcoming comments from the German Finance Minister said that the defence's euro is an act that deserves.
Spanish and Italian yields rose as the report adds to the nervousness of investors about when the schema of the ECB, which aims to reduce the cost of borrowing that fight emitting sovereigns of the zone euro, was going to start.
Investors were already nervous about Spain evident reluctance to seek a rescue - a condition for purchases of bonds the ECB - and the uncertainty was likely they underpin the German Bunds of safe haven in the coming days.
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EUR/USD continues to decline, although it was briefly touched 1.2915 before closing the session a correction America. Global market sentiment turned negative after Chinese manufacturing data, Japanese and European manufacturing trade balance which indicates economic growth is slowing, traders began to wonder whether the stimulus offered by the central bank will be adequate for the economic recovery.
U.S. data and the
Philadelphia Fed Index rose, it is surprising the market and strengthening USD.
Meanwhile, in the D1 chart we can see that the correction of the pair because he was offended at the FIBO 23.6 stochastic but it seems this will allow the pair to go down deeper.
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Concerns are growing for the condition of the Spanish economy. No high impact data will be released today, but tomorrow PMIs will be very important, since it will prove the most current release of the European economy.
In more than two months, significant process has been shown in the bank's solvency and the risk of an EMU breakup. However, most of the European economy is or towards a recession, making the regional growth rate reaches important levels of risk.
In addition, the market is still focused on whether or when Spain will come to an aid request and how the terms will be structured. And most analysts expect this to happen after September 28th.
In addition, D1 chart of the EUR / USD has also been showing over bought condition. This will allow for the euro bears to take over.
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Tuesday, Asian markets slightly lower, but still no clear trend. For now, this is a market looking for new guidance after last week’s strong trend. Yesterday, the EUR/USD showed some intraday volatility, but at the end of the day the changes limited.
German Chancellor Angela Merkel gave her annual press conference yesterday where she addressed the future of the Eurozone and made the unlikely claim that her “heart bleeds” for the suffering in Greece. Merkel urged European leaders to join together in order to increase political coordination across the region and stated that peripheral states must continue with the harrowing task of economic reform to help balance the Eurozone economy.
EUR/USD drifted lower during the morning trade in Europe, on limited profit taking after last week’s strong rally. Even so, the first ‘setback’ attracted very soon new buying interest.
This morning rumors had the EUR moving higher. The economic sentiment improved from -25.5 to -18.2 (consensus of -19.0), but current situation is much weaker, from 18.2 to 12.6 (consensus of 17.7). The ZEW survey points out a big change in EMU’s economic sentiment, rising from -21.2 to -3.8 in September. The EUR/USD is now falling again, towards its daily lows as we move to the US session where the calendar gets somewhat interesting.
Eventually there is no clear signal for this pair
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With traders anticipating good news for EUR/USD from today's major events, the shared currency had an easy time finding interested buyers. This pair found itself 99 pips higher at 1.2858, while EUR/JPY crept up 12 pips to finish at 99.96.
Yesterday's moves had little to do with yesterday's economic releases, as we all know the euro zone didn't release anything noteworthy. Instead, the euro's rally can mostly be attributed to market expectations. Traders are feeling good about today's lineup of events and they're hoping we'll get positive results.
Today, the euro zone is set to hold three major events - European Commission President Jose Manuel Barroso's the banking union proposal, the Dutch elections, and the German Constitutional court ruling at 15:00 (GMT+7). Today's developments could have a drastic impact on the euro zone economy over a long period of time, so the markets are keen on seeing positive outcomes.
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The EURO did it again... Because of speculation from ECB bond purchases and risk appetite in the markets, the euro ended the day higher. EUR/USD closed at 1.2594 after testing the 1.2500 handle, while EUR/JPY registered a 19-pip gain.
Judging by the dots on our forex calendar, the euro is in for a big day! Not only will France conduct its 10-year bond auctions, but Germany will also publish its factory orders report at 17:00 (GMT +7).
Of course, all other economic reports have nothing on the big boss of economic reports scheduled today. I’m talking about the ECB’s interest rate decision At 18:45 (GMT +7) we’ll know if the central bank has decided to cut its rates like many market players are predicting.
At around 19:30 (GMT+7) Super Mario will take center stage, where he is expected to announce some form of bond-buying program that would help ease the sky high peripheral bond yields. Will the ECB present a clear program and inspire risk appetite, or will it disappoint expectations by leaving a lot to interpretation?
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EUR/USD closed on a good note last Friday, thanks to more reports indicating that the ECB is considering flexible yield targets for shorter-maturity bonds. This pair also received a lot of support from comments by Chinese Premier Wen Jiabao who said that the Chinese government is willing to put money in Europe’s bond market.
Economic data from the region were also positive. The euro zone CPI flash estimate came in at 2.6%, slightly higher than the 2.5% forecast and the previous month’s 2.4%. Meanwhile, the euro zone unemployment rate was at 11.3%, just as expected.
This week will be a big one for the euro as an overabundance of economic events is scheduled to happen. Here’s a list of them with the most important ones in bold.
Monday: Spanish Manufacturing PMI (7:15 am GMT), Italian Manufacturing PMI (7:45 am GMT), and euro zone Manufacturing PMI (8:00 am GMT)
Tuesday: Spanish Unemployment Change (7:00 am GMT)
Wednesday: Euro zone Retail Sales (9:00 am GMT)
Thursday: ECB Interest Rate Decision (11:45 am GMT)
Friday: German Industrial Production (10:00 am GMT)
In addition to these events, also watch out for the U.S. non-farm payrolls. Even though it’s a U.S. report, it’s a major market mover that has a strong impact on most currencies.
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Risky assets are primarily unequivocally higher-yielding monetary instruments. Whenever you peruse about riskier assets, it regularly points to equities, futures, and higher-yielding monetary forms similar to the euro, pound, and Australian dollar. These assets ordinarily have higher yields to repay for the intrinsic hazard of keeping the aforementioned assets.
Seeing that the starting of the fiscal emergency in 2008, the aforementioned sorts of assets have practically moved in tandem. Whenever the majority of people was hazard opposed, riskier assets could come smashing down as business sector players could run to the protection of the dollar. When good faith began to advance, we'd see the inverse happen.
In late months be that as it may, we're beginning to see an offbeat story advance.
While U.S. value businesses and comdolls similar to the Aussie have been on the ascent, the euro has as a matter of fact been working.
It appears that the euros misfortunes began again in June, when European go-to people chose a development based procedure to go hand in hand with the various grimness measures that euro zone parts have been actualizing.
In turn, this has made the euro essentially weaker as contrasted with different risker assets. Provided that you were a mogul looking to make a greater blast with your buck, could you wager vast on a cash that is been on the verge of breakdown or on different assets that are fundamentally sound? Better believe it, that would be what I suspected.
Going send, we might see this difference keep on to play out and broaden advance. Recollect, in times of flat investment rates and extreme liquidity, communities take playing point by taking out credits to subsidize their ventures, which in turn might advance to higher benefits and stock costs.
In the interim, level premium rates and industrious security buys will just make the euro less engaging to gurus.
For now, we should see how the businesses respond once the middle of the year flavor arrives at a close. In the event that European officials can concoct a key that fulfills business members, who knows, we could actually see the euro avoid the late drift and take after the lead of different higher-yielding assets.
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Granted that the business sectors were uncommonly latent, the euro still wouldn't be able to summon the solidness to finish the day in the green. It slipped 12 pips in opposition to the dollar while withdrawing 19 pips in opposition to the yen. Bummer, buddy!
What made features up in Europe were reports that the ECB may be recognizing the utilization of yield tops on certain legislature securities in the euro zone. Essentially, with the utilization of yield tops, the centermost lender can be telling the businesses that it won't permit security yields to ascent past a certain indicate. I speculate you would be able to declare it works also to the EUR/CHF top that the SNB enabled!
Depending on if the ECB can some way or another prod through with yield tops, it would be able to irrevocably put an end to the locale's climbing acquiring expenses. At the same time recall, the proposed are unequivocally bits of gossip for now! Y'all shouldn't party about until things are official
No articles on the investment logbook today, but stay on your toes for further astound improvements and bits of gossip in the euro zone.
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