ERU Forex-Archive

Daily Economic News - Feb 29, 2008

The EUR continued to surge ahead yesterday and it reached a multi-year high versus the USD by rising up to the 1.5201 per dollar level. The EUR has been surging strongly against the dollar since Tuesday, breaking through the $1.5 mark for the first time since it started trading in 1999, as concerns about the U.S. economy were fueled by discouraging GDP from key retailers and homebuilders. The higher EUR makes goods from the 15-nation currency zone more expensive for customers abroad, or cuts into manufacturers' profits if they try to keep the U.S. dollar price of products constant. However, European Central Bank downplayed those concerns earlier this week. The ECB noted that more than 50 percent of Euro-zone countries' exports go to other Euro-zone members and so are not vulnerable to currency fluctuations. The Euro-zone exports have strongly contributed to growth of the 15-nation currency but on the other hand a weaker dollar boosts exports from the US to Europe. The EUR is being pushed forward by speculation of aggressive ECB policy of gradual rate increases, and on the basis of this fact in combination with ongoing weaker dollar forecasts we may soon see the EUR/USD traded at 1.55.

Daily Economic News - Feb 28, 2008

The EUR advanced yesterday vs.10 of the 16 most-active currencies in the past 5 days after the ECB policy makers expressed concerns that inflation in the Euro zone may quicken. The ECB officials also indicated that there is no change in their hawkish stance on Interest Rates. Therefore the EUR is likely to strengthen. The EUR also continues to benefit from the faulty condition of the USD. Besides the overwhelming strength and confidence being shown by the currency, the European economic forecast continues to release positive data. Yesterday's German Import Price Index printed at 0.8%, much higher than the forecasted 0.2%, while the British GDP remained stable at 0.6% Analysts predict that the Fed will lower the Interest Rate target by at least another 0.5 percentage point at next month's FOMC meeting. Meanwhile, the EUR could test 1.52 -53 levels in the short-term. The Fed has already lowered its benchmark overnight lending rates by 2.25 percentage points to 3% since last September, while the ECB has kept its main rate at 4%. Given the rate difference between the Europe and the U.S., the EUR will stay high as long as the BOE will keep its Interest Rates unchanged. Today, ECB President Trichet is expected to deliver a speech at 14:15 GMT in the Netherlands. As head of the central bank's governing body, which is responsible for setting the Euro zone's short term Interest Rate, his speeches can sometimes cause market volatility as traders react to clues regarding future monetary policy. Today, the EUR is expected to trade around its current high levels, and if the U.S. fundamental data disappoints, the EUR might add another 100 pips.

Daily Economic News - Feb 27, 2008

The EUR appreciated sharply against the greenback yesterday, reaching a new all time high and breaching the key 1.5000 level. There was positive news for the Euro-zone yesterday as the German Ifo Business Climate Index, which measures the mood of firms in manufacturing, construction, wholesale and retail, surprised on the upside releasing well above the forecasts at 140.1 up from its previous 103 mark. This news coupled with weak U.S data was the main driver of the EUR's sharp rally against the greenback yesterday. The reason for this is because the stronger-than-expected Ifo survey and high crude oil prices reduce expectations that the European Central Bank will cut rates to deal with a slowdown of growth in the Euro-zone. Looking ahead to today, we expect the German Consumer Confidence figure, German Import Price Index and the Euro-zone M3 Money Supply. These figures are unlikely to cause any volatility and any sharp EUR movement today will be dollar centric. The EUR will maintain its bullish rampage against the greenback for as long as the interest rate differential between the Euro-zone and the U.S continues to widen. If U.S data once again disappoints today, then the EUR will target another new high against the fragile U.S currency.

Daily Economic News - Feb 26, 2008

The EUR was little changed yesterday at 1.4821, taking a breather after hitting a three-week peak of roughly $1.4862 last Friday. The European markets rallied on hopes that 'Ambac', the embattled U.S. bond insurer, may soon announce a rescue package. 'Ambac', is currently facing billions of dollars of losses from guaranteeing repackaged subprime mortgages. The company is talking to banks and regulators about raising extra capital in order to retain its top credit ratings. With yet another fork in the road for invested US clients, the EUR continues to become a much safer and stable alternative for long term success. Today, investors will focus mainly on the German Ifo Business Climate as well as German Ifo Business Expectations indices for February. Traders will try to find clues on the health of the Euro-zone economy and its' interest rate outlook. The underlying impression remains that the European economy is slowing down and that at some point we could see interest rates in the Euro-zone decline. The hawkish stance by ECB President Trichet could be challenged if the ongoing trends continue. Today's economic news is particularly important for the EUR, and could be responsible for a key turning point in for the 15 Nation currency. It will be crucial for traders to identify how the preceding economic indicators from Europe and the US will affect the currency. Investors may expect another volatile trading session.

Daily Economic News - Feb 25, 2008

The EUR finds itself in excellent position this week to make historic gains versus all of its major currency rivals, namely the US dollar. EUR/USD begins the week well over 1.48, as we wait what is being forecasted as a strong Euro-zone economic news week. Amidst the deceleration of global economies, the Euro-zone has managed to string together a set of positive data, allowing it to make extra strides versus its most competitive rivals. Last Friday's early release of growing Manufacturing and Service PMI should be enough to push the European currency into bullish trends throughout the week. Today at 18:50 GMT, we expect a speech by European Central Bank (ECB) President Jean-Claude Trichet, at the New Year's Reception for Asia-Pacific, in Frankfurt. He will more likely than not, map out what we already assume to be a strong week for the EUR. Trichet's hawkish monetary policy has not changed and has allowed a continuation of EUR strength in the currency market. Investors should expect consistent bullish movement from the EUR across the board this week, as no change in policy and or interest rate should be expected in the near future. This week we will continue to see what is forecasted already as positive data from the retail sector, namely sales and PMI. Unemployment and CPI numbers, followed by the German IFO report will shape the list of significant economic events from the Euro-zone this week. With slowing markets and under achieving US economic data, the bullish EUR will be a force to be reckoned with.

Daily Economic News - Feb 22, 2008

Yesterday, the EUR hit a 2 week high, rising above 1.48 level against the fading greenback. The European currency surged after yesterday's U.S. Philadelphia Fed report printed much below expectations at -24.0. The EUR was also pushed higher by the GBP rally against the USD. Yesterday, the GBP added another 270 pips through a one-day trading session against the USD. The Cable appreciated as a result of the UK Retail Sales that printed at 0.8%, much above analyst's expectations. With the U.S. economy teetering on the verge of economic contraction and possibly even a recession, many market participants are waiting to see whether EUR can avoid the pull of its largest trade partner. Investors are scaling back expectations for the ECB rate cuts this year. Futures market are now pricing in only a 1-in-4 chance of a rate cut from the current 4%. Today, our attention will be mainly focused on the Euro zone PMI and New Orders data, along with the Canadian Retail Sales figures. It will be crucial for traders to identify how the preceding economic indicators from Europe and the U.K. will affect the 13 Nation currency.

Daily Economic News - Feb 21, 2008

The EUR weakened yesterday vs. the USD after a Labor Department Report showed both the U.S. CPI and the Core CPI indices rising above the expectations. Immediately after the report, the European currency tested the 1.4614 level against the greenback but soon reversed all of its losses and stood again above the 1.47 level. With every passing day, the European Central Bank is slowly shifting its tone. Earlier this month, ECB President Trichet, acknowledged that there are downside risks to growth which basically means that the Euro zone will no longer be immune to the U.S. slowdown it turns out that the credit markets could have a bigger impact on Euro zone growth than it was initially anticipated. The European economy is slowing down as the Euro zone households are not willing to spend as they did in the past, due to higher food and energy prices which sent inflation to a record high. That is the main reason why the ECB won't cut Interest Rates until all other options are utilized to the fullest. We expect a rate cut to come in the second half of the year, which might lead to a reversal in the EUR/USD. Today the most significant news coming out of the European markets will be the Swiss PPI the British Retail Sales. It will be crucial for traders to identify how the preceding economic indicators from Europe and the U.K. will affect the 13 Nation currency. Traders may expect another active trading session today.

Daily Economic News - Feb 20, 2008

The latest trends in Forex trading hint toward a strengthening of the EUR ahead of expected Inflation reports. The EUR saw a small boost versus the dollar, as the often traded pair stayed above the 1.47 key level. The Euro zone, along with the rest of the world's economies has been affected by a recent rise in food and energy prices. The futures market is currently pricing a EUR interest rate cut by 0.5% to 0.75% for this calendar year. As such figures have added to speculation regarding ECB interest rate policies, one of the main reasons why the European Central Bank has refused to cut interest rates is the growing inflation pressures on the Euro zone economy. Today, their ongoing hawkish stance may be validated by the German producer price report (PPI), which is forecasted improve by 0.4% compared to last month's figure. As this is the only scheduled event on the European calendar, expect most of the EUR movement to come as a response to today's US data.

Daily Economic News - Feb 19, 2008

With the absence of data coupled with the U.S. holidays, the EUR held broadly in a range yesterday. Overall the EUR/USD traded with a low of 1.4612 and a high of 1.4688 before closing the day at 1.4654. Meanwhile, there are more comments coming out of the ECB, which confirm the market's belief that the Central Bank is growing less hawkish. The ECB member Liikanen, said that the European growth will likely fall below 2% this year due to weakening sentiment and the ongoing financial turmoil. Currently, the market is pricing in between 50 to 75bp of interest rate easing by the ECB this year. But the biggest story in the European financial market yesterday was the British Prime Minister's announcement that the government will be temporarily nationalizing Northern Rock, one of the top 5 U.K. mortgage lenders. The decision has triggered a wave of GBP selling. The British Pound dropped to $1.9490 yesterday, from $1.9612 late on Feb. 15. It also fell to the lowest level in two weeks against the EUR. There is no Euro zone economic data due for release till tomorrow, when we expect German Producer Prices Index. Today, the EUR should continue to gain on speculations that the Fed will probably cut its benchmark rate at the next FOMC Meeting.

Daily Economic News - Feb 18, 2008

The EUR continued to gain ground all across the board last week, in particular against the greenback and the Sterling, as expectations of a rate cut by the ECB all- but diminished. ECB President Trichet emphasized that the problem of inflation is of greater concern than growth thereby eliminating any room for a rate cut in the near future. Now although the strengthening EUR has been dampening exports, the Euro-zone economy has remained resilient. So with the Fed and the BoE expected to continue slashing rates, the EUR is now in the driver's seat among the basket of major currencies and it is likely to target new highs in the near future. The only way that the EUR bubble will burst is if Euro-zone growth begins to show signs of a significant slowdown that would eventually force the ECB to lower rates. There is no real significant Euro-zone news expected today or tomorrow, so the EUR should be able to maintain its bullish movement. The short term outlook for the EUR remains bright as speculation of further rate cuts in the U.S and the U.K is resulting in the EUR being favored by global investors.

Daily Economic News - Feb 15, 2008

The EUR headed for the biggest weekly loss since December against the USD after the Fed Chairman Ben Bernanke warned that the bank may cut interest rates further to avert a recession. The EUR increased 0.9% versus the U.S. dollar and traded near a one-week high. Yesterday it traded at $1.4643 in afternoon trading, up from $1.4580. It is also expected the EUR may increase today to 1.4740 vs. the greenback. The U.S. economy is on a course of a serious slowdown and it is still under up coming pressure. A weaker USD is boosting exports from the U.S. to Europe. Many investors began recently to relocate numerous of their funds to European countries where their deposits and mixed income investments can obtain higher returns. The Euro is being pushed forward and European Central Bank is working by slow but sure moves of midterm rate increase. Data showed on Thursday that the German economic growth increased more than half in the 4th quarter. The German gross domestic product increased by 0.3% compared with the 3rd quarter. The 4th quarter was powered by a further strong increase in equipment investment and by net trade, suggesting German exporters enjoyed from the strength of the EUR. As for today's European calendar, there is only a Trade Balance figure expected to be released. Also, later that day the ECB President Trichet is scheduled to deliver a speech. As head of the central bank's governing body, which is responsible for setting the euro zone's short term interest rate, his speeches can sometimes cause market volatility as traders react to clues regarding future monetary policy.

Daily Economic News - Feb 13 , 2008

There was positive news yesterday for the EUR as both the German and Euro-zone ZEW Economic Sentiment released better-than-expected. These figures measure institutional investor sentiment and the monthly indicator reflects the difference between the share of investors that are optimistic and the share of investors that are pessimistic. Now although both the German and Euro-zone ZEW figures are still negative indicating that the share of pessismism outweighs the share of optimism, yesterday's figures nevertheless indicated an improvement in sentiment because there is declining pessimism. Therefore the EUR rallied against most of the majors, particularly versus the USD and the JPY on the back of the so called "Buffet Plan". Also the negative speculation surrounding the greenback ahead of today's U.S Retail Sales report was another key contributing factor in the EUR's sharp rally versus the greenback. The EUR's rally versus the JPY was eventually capped as investors concluded that the "Buffet Plan" was not enough to remove the negative sentiment surrounding the U.S economy. Nevertheless, the EUR was able to maintain its gains versus the troubled U.S currency which faces another difficult day today with the looming Retail Sales figures. Looking ahead to today, there should be more positive news for the EUR as Euro-zone Industrial Production is expected to release at 0.5%, which is significantly better than the previous figure of -0.5%. Therefore this is a very positive indication for the European economy as high levels of production are signs of a strong economy. So although the German economy is heavily reliant on exports, the Euro-zone economy is still showing resilience despite the strong EUR. We expect the EUR to continue its rally against the greenback today but much depends on how the U.S Retail Sales figures release.

Daily Economic News - Feb 12 , 2008

Over the weekend, ECB President Jean-Claude Trichet attempted to refocus markets on Euro zone inflation, however market skepticism continued as a string of weak economic data hurt the EUR. Steep declines within the service sector were one of the main catalysts behind the bearish trend of the 15- nation currency. It was the first time in 2008 that the market saw credible evidence that the EZ economy is not immune to the US slowdown and that an interest rate cut within the near future is unavoidable. Lately, the Forex market has reflected that leading economies cannot tolerate a weaker greenback, as it is noticeable that in spite of negative figures from the US economy the greenback is strengthening. This behavior is indication that the weakness of the Euro zone economy is legitimate and should continue to reduce EUR value. Traders should pay attention to the fact that the Euro zone's building price pressures are hurting consumer income and piercing profit margins for businesses, as this is only the beginning of what could be even more detrimental losses. The European Commission's flash estimate for January CPI surprisingly rose to a 14 year high of 3.2%, which puts the European Central Bank into a tight corner and stifles their ability to maneuver regarding monetary policy. Today, the German ZEW survey is due to be released as well as Euro zone Investor Sentiment, which is anticipated to deteriorate even more, as another fall for the ninth straight month is expected. The figure is forecasted at -45.0, the lowest number in almost 15 years. Forex traders are expecting the Euro zone GDP on Thursday, which will hold as a good measure of the negative impact being experienced as a result of the US slowdown. GDP data is forecasted at 0.4%, down from the last figure of 0.8%, as the market already expects more lethargic growth. If however, the data comes back with on the upside, some of the major concerns facing the EUR could slowly fade away.

Daily Economic News - Feb 11 , 2008

The EUR spent most of last week fighting off a string of negative data and rising concerns of a heavy slowdown in the Eurozone economy. As production numbers throughout the major European nations continued to be released the EUR managed to slip over 300 points against its staunch rival the greenback before ending Friday trading just above 1.45. The weakening state of the Eurozone economy has convinced many that ECB President Jean-Claude Trichet will cut interests rates to ease growth related pressure. This would be a move in a different direction as the hawkish stance held by the ECB had led many to believe that if any action was taken, it would have been a rate hike. The week ahead will produce a set of economic data that should help the EUR recover from last week's turbulent performance. French Nonfarm Employment, French and German GDP, Industrial Production, German ZEW Economic Sentiment are all on tap, as the week will begin with today's release of French Industrial Production. As data is expected to disappoint, two separate speeches by ECB President Trichet later this week should give us an idea how serious the Eurozone slowdown is.

Daily Economic News - Feb 7 , 2008

There was no significant data released from the Euro-zone yesterday but the EUR continued to depreciate as traders remained cautious ahead of today's ECB meeting. The Euro-zone economy suffered a solid blow on Tuesday when the Euro-zone PMI released unexpectedly weaker, indicating a serious deterioration in demand and that the U.S economic slowdown is now spreading into the Euro-zone. The ECB is expected to keep interests rates unchanged at 4.00%, despite falling growth as it maintains its hawkish stance with regards to inflation. However as a result of falling growth the ECB will encounter criticism and an overly tight monetary policy may damage the ECB's credibility. Also investors will closely watch President Trichet's speech that will follow the interest rate announcement for clues on future monetary policy and how the ECB is planning on tackling the issue of slowing growth and rising inflation. This is a very pivotal moment for the Euro-zone economy as growth is slowing so today's monetary policy by the ECB will have tremendous significance in determining the future direction of the EUR. The EUR should experience some sharp movement all across the board on the back of these news events today. Elsewhere, the BoE will also announce its benchmark interest rate and it is expected to cut rates by 0.25%, from 5.50% to 5. 25%. The UK economy has been severely hit by the spreading credit crisis, particularly the Northern Rock Bank, which is one of the major UK banks. Therefore the UK economy has been on slumping ever since the credit crisis emerged and so the BoE may attempt to stimulate the economy by cutting rates and thereby making credit more available. However the BoE will struggle to balance slowing growth and keeping inflation within targets. The GBP has been weakening steadily throughout this week against the greenback and once today's rate cut is behind us the GBP should consolidate in the near term.

Daily Economic News - Feb 6 , 2008

The EUR fell yesterday against USD. The European currency lost yesterday some 180 pips, which makes it the biggest move in the pair since the Fed surprised the markets with a 75bp intermeeting rate cut. The EUR particularly dropped after the German Services PMI and Retail Sales fell more than expected, indicating that the U.S. economic slowdown is spreading to Europe. This is a reliable indication that the Euro zone is heading towards a period of significantly weaker growth during the remainder 2008. The poor PMI Services data, which was released at 50.6, the lowest figure since July 2003, prompted speculations that the ECB will be forced to trim its growth forecast and eventually ease monetary policy this year. Also yesterday, the Euro zone Retail Sales fell short of expectations in the month of December as weak consumption in Germany offset stronger spending in France. Overall, the EUR traded with a low of 1.4620 and a high of 1.4834 before closing the day at 1.4648 in the New York session. As for today, there is no economic data due to be released from the Euro zone. Although the EUR slipped yesterday, it is too early to eulogize the European currency. The accelerating U.S. economic recession leaves quite a little doubt that the EUR will head back up after the current correction will lose its steam.

Daily Economic News - Feb 5 , 2008

With all the talk of movement in world interest rates, such as cuts in Britain and the US and hikes in Australia, the ECB continues its hawkish stance regarding it currency and will more likely than not keep rates the same ahead of Thursday's scheduled Interest Rate announcement. ECB President Jean-Claude Trichet, seems keen on keeping the thriving 15 nation currency intact, keeping rates at 4% flat. PPI and Consumer Confidence both returned negatively yesterday, having little effect on the EUR currency crosses. As Thursday's interest rate announcement slowly approaches, today could be an important one for the EUR, as most of its significant data for the week is on today's schedule. First is the 8:55 GMT release of German Service PMI, which is forecasted to lose 0.7 points. That will be followed by a 10:00 GMT announcement of Retail Sales for the month of January, which is forecasting at 0.2%, 7 percentage points up from its last measurement. These two figures should set the tone for the next couple of days, as all other EUR data will not appear until Thursday. It is no surprise that the EUR continues to dominate the USD, with elections and uncertainty still a big factor regarding the dollar; we should begin to see a bigger push by the EUR as it moves toward $1.50. If economic data returns with better than expected results, we could very well get to that mark faster than expected.