Eur/usd - page 40
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EUR/USD Oct. 21 – Quiet Start As Markets Await US Housing Data
After climbing to eight-month highs last week, EUR/USD is showing very little movement as we start the new trading week. The pair is trading in the mid-1.36 range in Monday’s European session. With the crisis in Washington over, the markets can focus on economic releases. On Monday, German PPI posted a gain of 0.3%, beating the estimate. Today’s highlight is US Existing Home Sales. The markets will also be keeping a close eye on Non-Farm Payrolls, which will be released on Tuesday.
Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.
Further levels in both directions: EUR USD Daily Forecast_Oct. 21th
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Merkel Coalition Talks May Last Until December Amid SPD Demands
Chancellor Angela Merkel and Germany’s Social Democrats prepared to negotiate through the end of the year after the SPD laid down its demands for concessions before entering a government as junior partner.
The SPD approved starting coalition talks yesterday after the party identified “essential” conditions to Merkel’s Christian Democratic-led bloc, including a nationwide minimum wage. Leaders from both factions said the parties will probably negotiate through November with the goal of swearing in a “grand coalition” of the two largest parties by Christmas.
“Now comes the hard part,” Volker Bouffier, the CDU premier of the western state of Hesse, told reporters today as he entered a party board meeting in Berlin. “We’re ready to compromise, but we expect the same from the SPD.”
SPD Chairman Sigmar Gabriel vowed to give a third-term Merkel government a Social Democratic imprint and lock in a coalition agreement that must be approved by the party’s 470,000 members. At the negotiating table, he’ll face a popular chancellor who won almost 42 percent of the vote on Sept. 22 and came five seats short of an absolute majority.
Merkel’s Christian Democratic Union and her CSU Bavarian sister party will start coalition talks with the SPD on Oct. 23, the day after Germany’s lower house of parliament, or Bundestag, holds its first post-election session.
About 85 percent of 229 SPD delegates yesterday ratified the decision for talks. To win over the rank and file, delegates demanded a minimum wage of 8.50 euros ($11.63) an hour, as well as shoring up pensions and investing in roads and schools.
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Greek 2012 Budget Deficit Revised Down
Greece's budget deficit declined in 2012 from the previous year after Eurostat revised data, while confirming Eurozone figures.
The budget deficit of Greece was revised down to 9 percent of gross domestic product from 10 percent in 2012 and it fell from last year's 9.5 percent, data published by the statistical office revealed Monday.
Meanwhile, the budget shortfall of Ireland was 8.2 percent of GDP, up from the previous estimate of 7.6 percent. Nonetheless, it remained well below 13.1 percent deficit logged in 2011.
The Eurostat confirmed the euro area's budget deficit figure at 3.7 percent compared with 4.2 percent in 2011. Also left the government debt unrevised at 90.6 percent of GDP.
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European Economics Preview: U.K. Public Sector Finance Data Due
Public sector finance data from the U.K. is due on Tuesday, headlining a light day for the European economic news.
At 2.00 am ET, Switzerland's foreign trade figures are due. The trade surplus is expected to rise to CHF 2 billion from CHF 1.86 billion in August.
In the meantime, Statistics Finland is set to release unemployment data. The jobless rate is seen rising to 7.2 percent in September from 7.1 percent in August.
Statistics Denmark is slated to publish retail sales figures for September. Sales remained flat on month in August.
At 4.00 am ET, Poland's retail sales and unemployment figures are due. Economists forecast retail sales to rise 4.6 percent year-on-year in September, up from 3.4 percent in August. The jobless rate is expected to remain at 13 percent in September.
The Office for National Statistics is scheduled to issue U.K. public sector finance data at 4.30 am ET. The budget deficit is seen at GBP 11.3 billion in September compared to GBP 13.2 billion in August.
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Europe Breakup Forces Mount as Union Relevance Fades
Thomas Bellinck, a Belgian theater director, has put a date on the European Union’s collapse: 2018.
The doomsday timeline of his Brussels exhibition called “Life in the Former EU: Final Years of the Long Peace,” presented the bloc’s six-decade run as a peaceful interregnum before the continent’s relapse into nationalism, an interlude where technocrats were too focused on regulating the diameter of tomatoes as their experiment in multinational democracy withered.
“We need national politicians who are either prepared to defend the project and redo it or admit that they don’t want to do it,” says the 30-year-old Bellinck. “But now we have something in-between.”
What the EU’s founders in the 1950s intended as “ever closer union” now risks going in the opposite direction: Britain is threatening to secede; the euro, battered by the four-year debt crisis, remains at risk of splintering; anti-euro forces are advancing in France, the EU’s heartland; separatists are pushing to burst the U.K., Belgium and Spain.
Economic lethargy combined with a deepening political quagmire and mounting debt load as leaders struggle to tame the legacy of the financial crisis risk condemning Europe to lag further behind emerging powers like China. Europe’s global heft is eroding: the euro zone’s share of global gross domestic product has fallen to 13.1 percent from 18.3 percent when the currency was forged in 1999, according to International Monetary Fund data.
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Euro jumps to late 2011 high after jobs report
The euro jumped on Tuesday to its highest level against the U.S. dollar since November 2011 after U.S. employment data signaled the Federal Reserve would extend its rate-depressing bond-buying program to 2014.
The Labor Department said the U.S. economy added 148,000 jobs in September, short of expectations for 185,000 jobs. The unemployment rate declined to 7.2%, the lowest rate since November 2008, from 7.3%. The labor data were delayed by the partial federal shutdown in October.
“The reaction in currency and bond markets to the U.S. September jobs report highlights traders’ lack of faith with the unemployment rate data,” said Ashraf Laidi, chief global strategist at City Index Ltd., in a note.
The euro surged above the $1.37 level after the jobs data. The euro EURUSD +0.73% bought $1.3784 in recent trade, up from $1.3682 on Monday. That’s the highest level since the close of $1.3788 on Nov. 4, 2011.
“We had two days of really tight ranges and I think the market was really waiting for confirmation until it took it to a new high,” said Camilla Sutton, chief foreign-exchange strategist at Scotiabank.
The “fairly weak” jobs data could push out expectations for an eventual slowing of the Federal Reserve’s bond purchases further into 2013, she added. The Fed currently buys $85 billion in mortgage and Treasury debt each month as part of its efforts to boost the economy. Monetary stimulus has been understood to weigh on the dollar. Some economists are now forecasting the Fed will avoid reducing bond purchases until early 2014.
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ECB Applies 8% Capital Buffer to 124 Banks in Asset Test
The European Central Bank said the definition of capital it uses to stress test banks will be stricter than the one in an imminent review of their assets, as it confirmed that lenders will be required to have a capital ratio of 8 percent.
The capital definition applicable on January 1, 2014 will be used for the asset-quality review, while the definition valid “at the end of the horizon” of the stress test will be used in that evaluation, the Frankfurt-based central bank said in an e-mailed statement today. The ECB will commence its study in November and conclude the three-part exercise in October 2014 before assuming supervisory powers over the region’s banks. The European Union is scheduled to fully implement global capital rules by 2019.
European officials have entrusted the ECB with overseeing the region’s financial system to prevent a repeat of the turmoil that set off the euro area’s worst recession since World War II. Expanding its mandate from setting monetary policy to direct oversight in 2014 is the most significant revamp in the institution’s 15-year history, and risks putting its reputation on the line as guardian of the euro.
“A single comprehensive assessment, uniformly applied to all significant banks, accounting for about 85 percent of the euro-area banking system, is an important step forward for Europe and for the future of the euro-area economy,” ECB President Mario Draghi said in the statement. “Transparency will be its primary objective. We expect that this assessment will strengthen private-sector confidence in the soundness of euro-area banks and in the quality of their balance sheets.”
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France October Business Sentiment Improves As Expected
Industrial confidence in France increased in October, in line with economists' expectations, after weakening in the previous month, latest data showed on Wednesday.
The headline industrial confidence index moved up to 98 points in October from 97 points in September, statistical office Insee said. The score matched economists' forecast.
Nevertheless, the composite business climate indicator, comprising all business-sub sectors, stabilized at 95 points in October, and stayed below its long-term average.
French construction firms were slightly more upbeat about their business conditions, with the corresponding sub-indicator rising to 94 points in October from 93 points in September.
Meanwhile, confidence among retailers weakened. The retail confidence index dropped to 99 points from 101 points. Similarly, the measure of sentiment in the service sector edged down to 93 points from 94 points in September.
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Italian Bank Stocks Tumble On Draghi Threat He "Won't Hesitate To Fail Banks"
Across the board, we are seeing European bank stocks (most notably Italian) trading halted. The 5-7% plunge in prices - just when everyone is proclaiming victory in Europe - reflects an apparent concern that the tougher-than-expected European bank stress-tests will expose the Italian banks for the bloated sovereign debt issuance soaks that they have become. As Draghi himself noted, in a desparate plea to maintain some credibility "banks do need to fail" to prove the credibility of the exercise, adding "if they do have to fail, they have to fail. There’s no question about that.". Spain is also under pressure and it would appear the "smart"money that chose to catch some knives in Greek banks may just lose more than one finger...
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Eurozone Consumer Confidence At 27-month High
Eurozone's consumer confidence increased further in October to its highest level in 27 months, preliminary data released by the European Commission showed on Wednesday.
The flash consumer confidence indicator for euro area climbed to -14.5 from -14.9 in September. The score was in line with economists' expectations.
The confidence reading is the strongest since July 2011, when it was -11. The index rose for the eleventh month in a row.
Sentiment remained unchanged in the EU during October. The index held steady at 11.7. In September, the indicator had surpassed its long-term average of -12.3 for the first time since June 2011.
Final figures will be released along with the economic sentiment survey data on November 28.
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