Eur/usd - page 12
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Draghi Sees More Signs Of Eurozone Recovery
European Central Bank President Mario Draghi indicated on Thursday that recent survey data revealed improvement in the euro area economy, suggesting that interest rates are likely to remain low in the near term.
"Recent confidence indicators based on survey data have shown some further improvement from low levels and tentatively confirm the expectation of a stabilization in economic activity," Draghi said in his introductory statement during the routine post-decision press conference in Frankfurt.
The Governing Council left the main refinancing rate steady at a record low 0.50 percent today. The rate was slashed by quarter-basis point in May, the first rate cut in nine months.
The bank also held the marginal lending facility rate at 1 percent, following a 50 basis points cut in May. The zero deposit rate was also left unchanged
ECB's monetary policy stance remains geared towards maintaining the degree of monetary accommodation warranted by the outlook for price stability and promoting stable money market conditions, Draghi said.
"It thereby provides support to a gradual recovery in economic activity in the remaining part of the year and in 2014," he added. The central bank's policy stance will remain accommodative for as long as necessary, he reiterated.
In July, the ECB broke away from tradition and issued a forward guidance. "The Governing Council confirms that it expects the key ECB interest rates to remain at present or lower levels for an extended period of time," Draghi said today.
He pointed out that this guidance was based on an unchanged overall subdued outlook for inflation extending into the medium term, given the broad-based weakness in the economy and subdued monetary dynamics.
Answering questions from reporters, Draghi said the forward guidance was unanimously confirmed by the Governing Council. He said there was no discussion within the Governing Council to tie the guidance to any fixed economic target or time horizon.
The forward guidance was effective in compressing volatility, he said. Draghi did not specify whether policymakers discussed any interest rate cut today or if the decision to leave rates unchanged today was unanimous or not.
Moreover, Draghi warned that the current money-market expectations for an interest rate hike is unwarranted. Data points need to get much better for the ECB to change its policy stance, he said.
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EUR/USD edges higher, U.S. jobs data in focus
The euro edged higher against the U.S. dollar on Friday, but remained under pressure ahead of highly anticipated U.S. employment data, as ongoing uncertainty over the future of the Federal Reserve's stimulus program continued to weigh on sentiment.
EUR/USD hit 1.3223 during late Asian trade, the session high; the pair subsequently consolidated at 1.3220, easing up 0.09%.
The pair was likely to find support at 1.3166, the low of July 25 and resistance at 1.3311, Thursday's high.
Market participants were looking ahead to data on U.S. nonfarm payrolls due later in the trading session for indications of how the recovery in the U.S. labor market is progressing, after data on Thursday showed U.S. jobless claims fell unexpectedly last week.
The Department of Labor said the number of individuals filing for initial jobless benefits in the week ending July 26 fell by 19,000 to a seasonally adjusted 326,000.
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EUR/USD extends gains after U.S. jobs data
The euro extended gains against the U.S. dollar on Friday, after the release of downbeat U.S. nonfarm payrolls data painted a mixed picture of the strength of the U.S. job market's recovery, weighing on the greenback.
EUR/USD hit 1.3279 during European afternoon trade, the session high; the pair subsequently consolidated at 1.3277, gaining 0.54%.
The pair was likely to find support at 1.3166, the low of July 25 and resistance at 1.3311, Thursday's high.
The Bureau of Labor Statistics said the U.S. economy added 162,000 jobs in July, disappointing expectations for a 184,000, after an increase of 188,000 the previous month.
The private sector added 161,000 jobs last month, less than the expected 189,000 increase, after 196,000 jobs were created in June.
However, the report also showed that the U.S. unemployment rate ticked down to 7.4% in July, from 7.6% the previous month. Analysts had expected the unemployment rate to slip to 7.5% last month.
The data came amid growing uncertainty over the future of the Federal Reserve's stimulus program, after the central bank said on Wednesday that it would keep buying USD85 billion a month in mortgage and Treasury securities and gave no hint of plans to pare its bond-buying program.
In the euro zone, official data earlier showed that the number of unemployed people in Spain fell for the fifth consecutive month in July, declining by 64,900 after a 127,200 fall the previous month.
Analysts had expected the number of unemployed people to fall by 80,000 last month.
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Spain To Suffer At Least 25% Unemployment Until 2018, IMF Forecasts
With the mean-reverting extrapolators all calling the bottom in Europe and scandal-plagued PM Rajoy desperate for distraction repeatedly arguing that the country's depressed economy is finally emerging from a two-tear slump, the FT reports that IMF has just popped that balloon of hope. "Spain has historically never generated net employment when the economy grew less that 1.5-2%,” the IMF notes, pointing out "yet growth is not projected to reach these rates even in the medium-term." In fact, echoing recent warnings from independent economists at exuberance over the most recent data (driven by seasonally-enhanced tourism) as the start of a new trend, the IMF warns, "the weak recovery will constrain employment gains, with unemployment remaining above 25 per cent in 2018." So, for Rajoy, its back to the grift.
Via The FT,
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ECB rates can go lower if economy deteriorates: Draghi
European Central Bank chief Mario Draghi suggested Thursday that interest rates could fall further from their current record lows should the economic outlook deteriorate for the euro area.
At its regular monthly policy meeting, the ECB's governing council voted to keep key rates unchanged at an all-time low of 0.5 percent, as expected.
But Draghi was convinced that the 17-nation bloc's economy appeared to be stabilising.
"Recent confidence indicators based on survey data have shown some further improvement from low levels and tentatively confirm the expectation of a stabilisation in economic activity," he said.
Nevertheless, "the risks surrounding the economic outlook for the euro area continue to be on the downside," he warned, pointing to uncertain global money and financial market conditions.
These "may have the potential to negatively affect economic conditions," Draghi said.
Also potentially harmful to the economic outlook was the possibility that domestic and global demand could turn out weaker then expected and if governments dragged their feet on much-needed economic reforms, he said.
The ECB policy of ultra-low interest rates would "provide support to a gradual recovery in economic activity in the remaining part of the year and in 2014," Draghi said.
And "looking ahead, our monetary policy stance will remain accommodative for as long as necessary. The governing council confirms that it expects the key ECB interest rates to remain at present or lower levels for an extended period of time," Draghi said.
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EU newest member Croatia plagued by economic worries
As soon as the fireworks marking Croatia's entry into the EU a month ago died down, the bloc's newest member was faced with the grim reality of a struggle with economic stagnation.
Unlike most other recent EU entrants, Croatia has not experienced a boom due to its accession as the bloc is itself in mid-crisis.
So while Croatia's July 1 EU entry crowned a decade-long effort and marked the closing of a political chapter dominated by the legacy of its 1990s independence war, little has changed economically.
Most of Croatia's 4.2 million people are still focused on how to make ends meet amid gloomy prospects for recovery in an economy that has either been contracting or stagnating since 2008.
Around one in five Croatians is out of work. The youth unemployment rate surpasses 50 percent -- more than double EU average of 23 percent -- with only Greece and Spain doing worse.
For Kristina Basnec, 25, a recently graduated musical instructor, the daily routine is to scan the job advertisements in newspapers and drop in a Zagreb employment office to check for postings.
"The most important thing now is to get the economy going, to create new jobs," she said, hoping her quest for work would not last long.
With recession dogging many of its EU partners, which account for 60 percent of its exports, Croatia has been unable to count on a pick me-up from accession. Moreover, many trade benefits had been granted earlier.
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EUR/USD weekly outlook: August 5 - 9
The euro ended Friday’s session higher against the dollar, after weaker-than-forecast U.S. jobs data dampened expectations that the Federal Reserve will start to scale back its asset purchase program later this year.
EUR/USD hit highs of 1.3294 on Friday, before settling at 1.3280, up 0.55% for the day and trimming most of the week’s losses.
The pair is likely to find support at 1.3065, Thursday’s low and resistance at 1.3177, the high of July 17.
The Department of Labor said the U.S. economy added 162,000 jobs in July, less than the 184,000 increase forecast by economists. June's figure was revised down to 188,000 from a previously reported 195,000.
The unemployment rate ticked down to 7.4% from 7.6% in June, due in part to more people leaving the labor force.
The data came amid growing uncertainty over the future of the U.S. central bank’s stimulus program, after the Fed said on Wednesday that it would keep buying USD85 billion a month in mortgage and Treasury securities and gave no hint of plans to taper its bond-buying program.
The euro weakened on Thursday after the European Central Bank maintained a dovish stance on interest rates.
Speaking at the bank’s post policy meeting press conference, ECB President Mario Draghi said the central bank’s monetary policy will remain accommodative “for an extended period of time”.
Draghi’s comments came after the ECB held its benchmark interest rate at a record low 0.50% in August, in line with expectations.
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Euro Starts Off Week Quietly as Italian PMI Shines
After showing some volatility late last week, EUR/USD has started off the week quietly. The pair is trading just below the 1.33 line in European trade on Monday. On Friday, US Non-Farm-Employment Change was a disappointment, falling well short of expectations. The Unemployment Rate edged lower, dropping to 7.4%. Taking a look at Monday’s events, Spanish Services PMI came in as expected, while Italian Services PMI jumped to its best level in over two years. Today’s sole event out of the US is a market-mover, ISM Non-Manufacturing PMI.
Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.
EUR/USD Technical
Asian session: Euro/dollar dropped was steady, touching a low of 1.3263. The pair consolidated at 1.3276. In the European session, the pair has edged higher and is testing resistance at 1.33.
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Euro touches session lows vs. dollar
The euro touched session lows against the dollar on Monday after data showed that euro zone retail sales fell in June, indicating that while the economy has stabilized the outlook for recovery in the region remains fragile.
EUR/USD hit 1.3256 during European afternoon trade, the session low; the pair subsequently consolidated at 1.3263, sliding 0.12%.
The pair was likely to find support at 1.3238, the low of July 29 and resistance at 1.3309, the high of August 1.
Eurostat said retail sales in the currency bloc were down 0.5% from May and fell 0.9% on a year-over-year basis. The month-on-month decline was the largest since December 2012.
The euro briefly touched session highs earlier after data showed that the euro zone’s services purchasing managers’ index rose to 49.8 in July, from a final reading of 48.3 in June, adding to signs of a recovery in the euro zone.
The dollar remained under pressure after Friday’s weaker-than-forecast U.S. jobs data dampened expectations that the Federal Reserve will start to unwind its asset purchase program later this year.
Elsewhere, the euro was lower against the pound, with EUR/GBP down 0.51% to 0.8641.
Sterling strengthened broadly after data showed that the U.K. service sector expanded at the fastest pace in more than six-and-a-half years in July.
The U.K. services PMI rose to 60.2 from 56.9 in June, well above economists’ expectations for a reading of 57.2.
Investors were looking ahead to the Institute for Supply Management's non-manufacturing index later Monday for indications on the strength of the U.S. economic recovery.
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Cyprus Unemployment Surges 32% Year-Over-Year
With PMIs picking up across Europe, the nations' 'leaders' are spreading the good word that the worst is over (again) and its all sunshine and unicorns from here. But it's not. As Cyprus' Anastasiades glibly comments on small improvements in their capital controls - amid collapsing deposits, bluntly ignoring the reality of a record implosion in the nation's home prices, the facts for the man on the street are dismal. The number of jobless people in the smallest EU nation jumped 32% year-over-year to its highest in the 19 years data has been collected.
[The current number of unemployed Cypriots is five times its pre-crisis levels!]
The ever-idiotically-optimistic IMF predicts unemployment will peak at 16.9% (with Cyprus unemployment standing at 15.9% in Q1 already) and 13% cumulative contraction in GDP and it seems there is little light at the end of the tunnel for the average Cypriot (even as the Cyprus stock index has risen 4% in the last week).
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