Eur/usd - page 36
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European Economics Preview: BoE Likely To Hold Key Rates
The monetary policy announcement from the Bank of England is the major event due on Thursday, headlining a busy day for the European economic news.
At 2.45 am ET, French industrial output figures are due. Economists forecast output to grow 0.6 percent month-on-month in August, reversing a 0.6 percent drop in July.
At 3.30 am ET, Statistics Netherlands is slated to issue consumer prices for September. In the meantime, Sweden consumer prices and industrial output figures are also due. Inflation is forecast to rise marginally to 0.2 percent in September from 0.1 percent in August.
At 4.00 am ET, the European Central Bank is scheduled to release its monthly report.
Italy's industrial output data is due at 4.00. Production is expected to grow 0.6 percent on a monthly basis in August, following a 1.1 percent fall in July. Also, Norway's consumer and producer prices are due.
At 6.00 am ET, Ireland's consumer prices are due. EU harmonized inflation is seen at 0.1 percent in September.
At 7.00 am ET, the Bank of England is set to announce the results of the two-day rate-setting meeting. The bank is expected to maintain its key bank rate at 0.50 percent and asset purchase programme unchanged at GBP 375 billion.
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Draghi’s Next Policy Move Seen Easing Liquidity Not Rates
The European Central Bank’s next monetary-policy move will be a non-standard one, economists say.
While almost three in four of them predict President Mario Draghi will unveil new liquidity measures such as longer-term refinancing operations, the majority of forecasters say interest rates will remain unchanged through the first half of 2015, according to separate surveys by Bloomberg News.
The ECB, which has kept its benchmark interest rate at a record low of 0.5 percent since May, is assessing its options for underpinning the euro area’s nascent recovery as banks remain hesitant to lend. Draghi has fueled expectations of a fresh round of long-term loans by saying the ECB is “ready to act accordingly and as needed” to contain money-market rates.
“As long as soft indicators improve and hard data follows suit, there is no reason for the ECB to cut rates,” said Carsten Brzeski, senior economist at ING Groep NV in Brussels. “A new LTRO could kill several birds with one stone: it could solve possible liquidity bottlenecks, could lower money-market rates and, above all, would help lock in market expectations.”
In the survey of 43 economists on liquidity options, 74 percent said the ECB will unveil new measures, and 25 economists said a so-called long-term refinancing operation is a probable instrument. In a separate survey of 46 economists, 89 percent said the central bank’s benchmark interest rate will stay at the current level, with the rest saying it’ll be cut by a quarter point.
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In August 2013, manufacturing output improved slightly (+0.3%)
In August 2013, manufacturing output increased slightly (+0.3%, after –0.8% in July). This rise is related to the manufacture of transport equipment, sector in which production fell in July. Output increased as well in industrial production as a whole (+0.2%, after –0.6% last month).
During the last three months, manufacturing output decreased (–0.7%)…
Output decreased in other manufacturing (–0.6%) and in the manufacture of electrical and electronic equipment; machine equipment (–1.3%). It dropped by 6.7% in the manufacture of coke and refined petroleum products. On the other hand, output increased in the manufacture of transport equipment (+0.4%).
…and was lower than its last year’s level by 2.4%
Output went down significantly in other manufacturing (–2.6%), in the manufacture of electrical and electronic equipment; machine equipment (–2.6%), in the manufacture of food products and beverage (–2.9%) and in the manufacture of coke and refined petroleum products (–6.3%). On the opposite, output improved in the manufacture of transport equipment (+0.6%).
Please note: all the series are adjusted for seasonal variations (SA) and the number of working days (WDA).
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Italy Industrial Output Unexpectedly Falls as Recession Lingers
Italian industrial output unexpectedly fell for a second month in August, a decline that may extend the nation’s recession into a third year.
Production decreased 0.3 percent from July, when it dropped a revised 1 percent, national statistics office Istat said in Rome today. Economists had forecast a 0.6 percent rise, according to the median of 15 estimates in a Bloomberg survey. Output fell 4.6 percent from a year earlier when adjusted for working days.
The euro region’s third-biggest economy may still be mired in the slump it entered two years ago as the sales abroad of the country’s goods fail to offset the effect of rising unemployment on domestic demand. Still, business and consumer confidence rose last month to the highest since the second half of 2011 with executives and households sharing the government’s optimism that Italy will exit the slump by year-end.
Italy’s unemployment rate rose more than forecast in August, returning to an all-time high of 12.2 percent reached in May, Istat said Oct. 1.
Italy, whose economy went through four recessions since 2001, needs government stability to meet the budget and economic targets agreed upon with the European Union. On Oct. 2 Prime Minister Enrico Letta won a confidence vote in parliament after former Premier Silvio Berlusconi threatened to bring down the five-month old government.
Istat initially reported an industrial output decline of 1.1 percent in July.
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EUR/USD holds steady on hopes for end to U.S. impasse
The dollar held steady against the euro on Thursday, trimming earlier losses after reports emerged that congressional Republicans will seek a temporary increase to the U.S. debt ceiling to avoid defaults with the aim of ending a fiscal impasse that has closed the U.S. government.
In U.S. trading on Thursday, EUR/USD was up 0.08% at 1.3534, up from a session low of 1.3488 and off from a high of 1.3545.
The pair was likely to find support at 1.3486, Wednesday's low, and resistance at 1.3607, Tuesday's high.
In the U.S. earlier, House Speaker John Boehner said Republicans would offer a temporary increase in the debt ceiling in exchange for dialogue with President Barack Obama on budget and deficit issues.
Hopes that talks will lead to an end to the government shutdown and avoid defaults while opening the door to broader fiscal reforms down the road firmed the greenback.
U.S. Treasury Secretary Jack Lew reiterated Thursday that the U.S. will reach its debt ceiling on Oct. 17 and warned that the political crisis is starting to hurt the economy. The comments came during testimony to the Senate finance committee.
The dollar shrugged off a report by the Department of Labor showing that U.S. initial jobless claims rose to 374,000 last week, an increase of 66,000 from the previous week's unrevised figure of 308,000.
The number was high due to a computer glitch in California related to technology upgrades.
Elsewhere, the euro was up against the pound and up against the yen, with EUR/GBP trading up 0.04% at 0.8478 and EUR/JPY trading up 0.82% at 132.74.
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German Consumer prices in September 2013: +1.4% on September 2012
Consumer prices in Germany rose by 1.4% in September 2013 compared with September 2012. The inflation rate as measured by the consumer price index had been 1.5% in August 2013. The increase in prices thus slowed down slightly. Compared with August 2013, the consumer price index remained unchanged in September 2013. The Federal Statistical Office (Destatis) thus confirms its provisional overall results of 27 September 2013.
The inflation rate in September 2013 was mainly due to the price development of mineral oil products (−6.5%). The year-on-year price decrease for both heating oil (−5.8%) and motor fuels (−6.7%) had a downward effect on the overall inflation. Not considering mineral oil prices, the inflation rate in September 2013 would have been +1.9%.
Overall energy prices in September 2013 decreased slightly by 0.2% from September 2012. Contrary to the favourable price development of mineral oil products, however, electricity prices (+11.5%) and solid fuel prices (+6.1%) in September 2013 were considerably up on a year earlier.
Food prices in September 2013 (+4.7%) were again markedly higher than the overall inflation rate. Consumers had to pay considerably more than a year earlier for edible oils and fats (+13.6%; including butter: +29.2%). For many other food products, too, considerable price rises were recorded (for example, fruit: +6.8%; vegetables: +6.6%; dairy products and eggs: +6.7%; meat and meat products: +4.2%).
Total goods prices rose by 1.3% in September 2013 compared with September 2012. Apart from some energy products and food, prices were also up, for example, for newspapers and periodicals (+5.0%) and tobacco products (+3.9%; including tobacco: +6.3%; cigarettes: +3.7%). For some goods, prices were markedly down from a year earlier, for example, coffee (−4.5%), consumer electronics (−5.7%) and information processing equipment (−11.3%).
Total service prices rose by 1.6% in September 2013 compared with September 2012, which was a larger increase than for goods prices. This development was mainly caused by net rents exclusive of heating expenses (+1.4%), for which households spend a good fifth of their consumption expenditure on average. Marked price rises were observed, for example, for hairdresser services (+3.7%), transport association tickets (+3.8%), recreational and sporting services (+3.9%) and games of chance (+21.3%). Prices were down on a year earlier only for a small number of services (for example, telecommunications services: −1.5%; out-patient health services (−12.2%).
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Draghi Says ECB Guidance Allows Rate Cuts on Volatility
European Central Bank President Mario Draghi said policy makers’ pledge to keep interest rates low explicitly allows for cuts in borrowing costs if market volatility resumes.
“The Governing Council has unanimously agreed to incorporate an easing bias that explicitly provides for further rate reductions, should the volatility in money market conditions return to the levels observed in early summer,” Draghi said at the Economic Club of New York yesterday.
ECB policy makers are seeking to prevent volatility in market rates from derailing a euro-area economic recovery that Draghi said was subdued, uneven and fragile. To that end, they pledged in July to keep official interest rates at or below current levels for “an extended period.” Borrowing costs had risen after the U.S. Federal Reserve said it was considering tapering its stimulus later this year.
The overnight rate that banks expect to charge each other by the ECB’s October 2014 meeting, as measured by Eonia forward contracts, was at 0.24 percent in Frankfurt today. The measure was below 0.1 percent in May and climbed as high as 0.37 percent in June before the ECB announced its unprecedented forward guidance.
Unlike the Fed and the Bank of England, the ECB doesn’t give a specific time frame or a link to particular economic data for its rate pledge. Instead, Draghi reiterated that it depends on the outlook for prices.
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Bank of Cyprus posts record EUR 2.2 bn loss for 2012
Bank of Cyprus, the recession-hit Mediterranean island's largest lender, Friday announced a record loss of 2.21 billion euros ($3 billion) in 2012, up more than 60 percent on its 2011 losses.
Cyprus agreed in March to a 10-billion-euro rescue package negotiated with the European Commission, European Central Bank and International Monetary Fund to bail out its troubled economy and oversized banking system.
The deal included the closure of the island's second-largest bank Laiki and a 47.5 percent "haircut" on deposits above 100,000 euros at the Bank of Cyprus.
"Events following Eurogroup's decision on Cyprus have significantly impacted the Bank of Cyprus Group," the BoC said in a statement.
It said profit before penalties and restructuring costs was 620 million euros in 2012, down 22 percent from 797 million euros the year before.
There was also a significant 441 percent spike in provisions for bad debt to 2.30 billion euros from 426 million euros in 2011, driven by the deterioration of the bank's loan portfolio.
The unprecedented "haircut" on deposits forced the government to close all the island's banks for nearly two weeks in March and impose draconian controls when they reopened.
To prevent a rush on deposits, there is still a 300-euro daily cash withdrawal limit, while cheques cannot be cashed and central bank approval is needed for large business transactions.
The BoC has only now been able to announce its results after a restructuring and the appointment of a new board.
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EUR/USD Forecast October 14-18
EUR/USD traded in range on the US uncertainty and eventually closed the week marginally lower. Will it pick a new direction now? German ZEW Economic Sentiment, industrial and inflation data are the main market movers. Here is an outlook for the market moving events, and an updated technical analysis for EUR/USD that holds above uptrend support so far.
EUR/USD was supported by the US government shutdown and the upcoming debt ceiling deadline, as well as the poor jobless claims reading. Germany posted an unexpectedly strong trade surplus of 15.6 billion in September but Factory Orders dropped by 0.3% while expected to gain 1.2%. Germany is the leading economy in the Eurozone, having a strong impact on market sentiment. Will German economy growth pick-up in the coming week? Let’s start:
*All times are GMT
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Ireland set to exit EU-IMF bailout in December
Ireland is on track to exit its international bailout programme in mid-December, Prime Minister Enda Kenny said although he warned there was still some way to go to recover from a deep economic crisis.
Ireland was forced to turn to the European Union and the International Monetary Fund for an 85-billion-euro ($115 billion) bailout in 2010 after its banks collapsed and its overheated property market went into meltdown.
Kenny told a conference of his Fine Gael party on Saturday there were "fragile times" ahead and a budget due on Tuesday would be tough, but that Ireland was ready to leave the bailout.
"Tonight I can confirm that Ireland is on track to exit the EU-IMF bailout on December 15. And we won't go back," he said.
"It won't mean that our financial troubles are over. Yes, there are still fragile times ahead. There's still a long way to go.
"But at last, the era of the bailout will be no more. The economic emergency will be over."
Kenny admitted the budget would include another 2.5 billion euros ($3.4 billion) in tax rises and spending cuts.
But he said it would leave Ireland running a 4.8 percent deficit next year, and pledged that the government would publish a new economic plan for the medium term by the end of the year.
Ireland enjoyed double-digit economic growth for a decade from the mid-1990s, earning it the nickname of the "Celtic Tiger", but it was hammered by the 2008 global financial crisis.
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