EUR Forex - Archive

Daily Economic News - Jan 13, 2008

Yesterday, the European Central Bank left interest rates unchanged at 4.00 percent. No one expected the ECB to make a move so the actual decision was already incarnate for the Euro zone. It was not until ECB President Trichet began his speech did the EUR really take off. Even though the Trichet did not make any groundbreaking comments, his commitment to preventing second round effects was more than satisfactory for EUR bulls. For the ECB, inflation remains a very big problem and because of that, they are ready to act preemptively on rates because waiting for second round effects to manifest themselves could be too late. On growth, Trichet acknowledged that the risks are to the downside, but for the time being, he still feels that euro-zone fundamentals remain positive and growth should remain around the potential target. Even though it is unclear whether Trichet is all talk and no action, the ECB's threat to raise rates comes in stark contrast to the Federal Reserve's hints of more aggressive easing - and this is all that matters for the time being. These contrasting opinions could drive the EUR to new highs against the greenback in the near future.

The GBP kept it rates on hold at the MPC meeting as policy makers appreciated the effects of last month's reduction on the economy. Economists now expect the BoE to wait until next month before lowering rates again as banks rein in lending, damping consumer spending and deepening a slowdown in the housing market. The GBP recovery now seems to be just around the corner but much depends on whether the monetary actions by the BoE can cause the UK economy to correct itself.

Daily Economic News - Jan 10, 2008

The Euro traded on Tuesday to relatively static results, spending the day hovering above and below 1.47 against the dollar. Mixed results from a set of minor economic data kept the currency stable throughout the day.

Retail sales dropped 1.4% from the 2006 figure, which was the steepest decline in over 11 years. The lag from the 13-Nation currency did not last long as German factory orders came back considerably strong as it saw a generous November increase. The Euro has continuously avoided any real bearish activity as a combination of stable Eurozone data and disastrous US and Asian market data has proved that the European Central Bank's hawkish stance on monetary policy will likely continue.

Looking ahead, today, the Eurozone will produce economic data that should not have a very big affect on its movement. The day will see German trade balance, industrial production and retail sales, as well as general Euro GDP and the French trade balance. All should remain quiet at least until Thursday, as we await the ECB monetary policy meeting, coupled with ECB President Trichet's remarks. Look for the EUR to continue to prove its strength against its rivals.

Daily Economic News - Jan 9, 2008

Yesterday, France became the latest major European economy to warn of a period of sluggish growth and high inflation. Soaring energy prices and fresh signs that the United States may suffer a sharp slowdown are threatening to drag down European expansion.

Echoing concerns are voiced by various leaders in Germany and Britain, such as the French finance minister, Christine Lagarde, who said in an interview that the outlook for Europe had eroded rapidly as oil prices breached the symbolic $100 and with pessimistic analysts marking the $200 a barrel as the next target price for 2008. Credit markets remained nervous and the outlook for the U.S. economy darkened.

The world's top central bankers are gathered in Switzerland this week to discuss the global economy, as voices called for the European Central Bank to make growth a priority over inflation-fighting in the euro area. It is shown that everybody prefers high inflation and high growth, as opposed to stable inflation and lower growth, and expected from the economic leaders and the ECB to be adjusted to the new situation and to act accordingly.

In the euro zone, November retail sales are due, but they are not market movers. German factory orders are more interesting and following the stellar 4.0% monthly rise in October; a partial correction in November is forecasted. In the UK, the BOE interest rate announcement is expected this week, as the board will take note of the British Retail figures for the crucial month of December, released overnight. The BRC said that sales growth rose just 0.3%, compared with 1.2% in November, despite early price discounts to boost sales. The figures may give the doves on the MPC some ammunition to vote for another rate cut on Thursday.

Daily Economic News - Jan 6, 2008

The EUR continued its bullish rampage yesterday and the recent sharp strengthening of the EUR will once again raise concerns over the state of European exports. The German economy is one of the key players in the EU and it is heavily reliant on exports. However the sharp appreciation of the EUR has begun to dampen the German economy as was seen late last year. Germany's unemployment rate decreased to the lowest in almost 15 years in December. Declining unemployment in Germany revealed warning signs coming from Europe's major economy as it struggles to cope with the EUR's 12% gain against the U.S. dollar over the past year. German business confidence chopped down to the lowest in almost two years in December. Retail sales fell for a third month. Nevertheless this negative news did not really shake up the resilient EUR and we are seeing the 15 nation currency rally sharply in the New Year. Germany's unemployment rate was left unchanged at 8.1% in December, as the number of German citizens without work has reached to just over 3.4 million. Wednesday's report pushed the EUR down to $1.4373 in European trading, from $1.4409 in late trading Tuesday night in New York.

Businesses in Germany are concerned with the escalating rate of borrowing. Banks are suspicious of lending to each other, due to uncertainties of loans backed by U.S. subprime mortgages, and this fact has resulted in a dramatic slowdown in lending to corporations and individuals.

Daily Economic News - Jan 3, 2008

The European Central Bank mentioned that it will seek to drain as much as 200 billion Euros ($293 billion) from the euro-region money market to keep short-term interest rates close to its benchmark. This kind of activity may cause the EUR to lose ground in the future. The liquidity-absorbing operation will settle today and mature on Jan. 3, said the Frankfurt-based central bank in its recent statement. The bank called for bids to be submitted by 10:35 a.m. today. The operation will be offered at a fixed rate of 4 percent. The ECB added an unprecedented 348.6 billion Euros in two weeks injecting money into the banking system on Dec. 18 to ease a gridlock in money markets. Since Dec. 19 it has been mopping up additional cash. The ECB said today that banks parked 9.135 billion Euros in its deposit facility on Dec. 31, the most since January 2001.

Cyprus and Malta adopted the euro on Tuesday, tying two tiny countries on the edge of Europe to its core institutions, however raising consumer fears of higher prices, which is the major concern of each economy that is being embraced by the Euro-zone.

The New Year Euro's expectations are to maintain it's strengthening against the majors in the first half of 2008, especially as non flattering figures are reflected from US and the UK.