Eur/usd - page 46
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Euro broadly higher, gains seen limited
The euro rose to session highs against the dollar, the pound and the yen on Tuesday but gains looked likely to remain limited after weak German inflation data raised concerns over weakening demand in the euro zone.
EUR/USD pulled away from session lows of 1.3359, to hit 1.3429 during European afternoon trade, rising 0.16%.
The pair was likely to find support at 1.3343, Friday’s low and a seven-week low and resistance at 1.3450.
Data released on Tuesday showed that the annual rate of inflation in Germany, the euro zone’s largest economy, slowed to 1.2% in October, the lowest level in more than three years, from 1.4% in September.
The data added to concerns over growing deflationary pressures in the euro area, after the annual rate of inflation across the euro zone slowed to a four year low of 0.7% in October.
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Asmussen: ECB Not At Lower Bound On Interest Rates
The European Central Bank has room to cut interest rates further and it will also consider charging banks to deposit their cash, but such a move was unlikely in the near term, European Central Bank Executive Board Member Jorg Asmussen said on Tuesday.
The central bank has not reached the lower bound on interest rates and it depends on how inflation develops, Asmussen said in an interview to the German daily Neue Osnabruecker Zeitung. Last week, the ECB sprung a surprise by cutting the key interest rate by a quarter-point to a record low 0.25 percent, given the combination of low inflation, record unemployment and a stronger currency.
The policymaker said that it was out of question that the ECB had to cut rates this month to maintain the price stability goal. He also stressed that it was important that the central bank disclose the voting pattern of its rate-setting sessions.
The central bank maintained the zero deposit rate last week. Today, Asmussen said a negative deposit rate cannot be ruled out. "I would be very wary of such a step, because if has a strong signalling effect, but I would not rule it out in principle," the policymaker added.
After announcing the latest interest rate cut, ECB President Mario Draghi had reiterated that the bank stands ready to move the deposit rate lower, when needed. He also revealed that policymakers did discuss the deposit rate last week.
Asmussen said that the ECB can also consider removing the minimum reserve requirement for banks, thereby providing them more liquidity.
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Dutch September Trade Surplus Drops; Retail Sales Fall
Netherlands' merchandise trade surplus decreased in September from last year, data released by the Central Bureau of Statistics showed Wednesday.
Overall trade during September resulted in a surplus of EUR3.3 billion, which was lower by EUR0.4 billion than in the same month of last year.
The country exported goods worth EUR35.1 billion in September, which was unchanged from last year's figure. Meanwhile, the value of imports increased 1.4 percent annually to EUR31.9 billion.
In volume terms, exports decreased a working-day adjusted 0.6 percent year-on-year in September, while imports advanced 1.6 percent.
The agency further noted that Netherlands' export prices declined 2 percent year-on-year in September. Import prices were lower by 2.9 percent than in September 2012.
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ECB's Praet: All Options on Table
The European Central Bank could adopt negative interest rates or purchase assets from banks if needed to lift inflation closer to its target, a top ECB official said, rebutting concerns that the central bank is running out of tools or is unwilling to use them.
"If our mandate is at risk we are going to take all the measures that we think we should take to fulfill that mandate. That's a very clear signal," ECB executive board member Peter Praet said in an interview Tuesday with The Wall Street Journal. Annual inflation in the euro zone slowed to 0.7% in October, far below the central bank's target of just below 2% over the medium term.
He didn't rule out what some analysts see as the strongest, and most controversial, option: purchases of assets from banks to reduce borrowing costs in the private sector. "The balance-sheet capacity of the central bank can also be used," said Mr. Praet, whose views carry added weight as he also heads the ECB's powerful economics division. "This includes outright purchases that any central bank can do."
Additional stimulus from the ECB isn't needed right now, Mr. Praet signaled, noting that inflation risks for the euro zone as a whole are balanced after last week's unexpected ECB interest-rate cut.
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Euro Tumbles After ECB Hints At QE
Despite the ECB's recent "stunning" rate cut, which sent the EUR modestly lower by a few hundred pips, the resultant resurge in the European currency has left the European Central Bank even more stunned: just what does it have to do to force its currency lower and boost Europe's peripheral economies, especially in a world in which every other major central banks is printing boatloads of money each and every month?
We hinted at precisely what the next steps will be two days ago when in "Next From The ECB: Here Comes QE, According To BNP" we said "BNP is ultimately correct as the European experiment will require every weapon in the ECB's arsenal, and sooner or later the ECB, too, will succumb to the same monetary lunacy that has gripped the rest of the developed world in the ongoing "all in" bet to reflate or bust. All logical arguments that outright monetization of bonds are prohibited by various European charters will be ignored: after all, there is "political capital" at stake, and as Mario Draghi has made it clear there is no "Plan B." Which means the only question is when will Europe join the lunaprint asylum: for the sake of the systemic reset we hope the answer is sooner rather than later."
Two days later the answer just appeared when moments ago the WSJ reported that the ECB's Praet hinted more QE is, just as we predicted, on the table.
From the WSJ:
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German Gross domestic product up 0.3% in 3rd quarter of 2013
The German economy continues to grow. In the third quarter of 2013, the gross domestic product (GDP) rose 0.3% on the previous quarter after adjustment for price, seasonal and calendar variations; this is reported by the Federal Statistical Office (Destatis). In the second quarter of 2013, the GDP increase had been much larger (+0.7%), following a stagnation at the beginning of the year.
Positive contributions were made only by domestic demand in the third quarter of 2013. Final consumption expenditure of households and of government was somewhat higher than in the previous quarter. Also, there was an increase in gross fixed capital formation both in machinery and equipment and in construction compared with the second quarter of 2013. The balance of exports and imports, however, had a downward effect on GDP growth. While imports continued to increase, exports were less dynamic when compared with the previous quarter.
In a year-on-year comparison, too, the GDP increased. The price-adjusted GDP in the third quarter of 2013 was up by 1.1% (0.6% when calendar-adjusted) from the third quarter of 2012.
According to provisional calculations, the economic performance in the third quarter of 2013 was achieved by 42.0 million persons in employment in the domestic territory, which was an increase of 253,000 persons or 0.6% on a year earlier.
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Ireland to exit Europe's emergency room
Three years after turning to the EU and International Monetary Fund for €85 billion in aid, Ireland is poised to become the first bailed-out eurozone country to make a full return to financial markets.
Ireland was brought to the brink of collapse in 2010 by a real estate crash that forced the government to backstop the country's banks, sending its budget deficit soaring and the cost of new borrowing to punitive levels.
The rescue package was made up of €45 billion worth of emergency loans from the EU, €22.5 billion from the IMF and €17.5 billion from Ireland's own reserves and pensions.
In return, the government pledged to introduce a four-year austerity plan, including deep cuts in spending and public sector employment, higher taxes and a lower minimum wage.
By the end of 2014, the savings will have totaled €16.4 billion, equivalent to about 10% of annual gross domestic product.
The Irish government said Thursday that it would exit the program as planned on December 15, choosing to forego the security of a credit line from the EU's bailout fund.
That will leave it completely exposed to the whim of the market, and unable to access the European Central Bank's untested bond-buying program at a time when the outlook for the broader European economy remains shrouded in uncertainty.
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Bundesbank Warns Against Low Interest Rates
Germany's financial system is facing growing strain from the low-interest-rate environment and the new policy tools must be kept ready to be deployed when needed, the Bundesbank said on Thursday.
In the 2013 Financial Stability Review, the bank also said the European debt crisis is not yet over and remains a risk to financial system stability.
"The risk of contagion remains high," Bundesbank Executive Board member Andreas Dombret said. "It is a matter for concern for us that the ties between governments and domestic banks have tightened again in several countries."
Media reports suggest that Germany was against the European Central Bank decision to cut interest rates this month.
Low interest rates pose longer-term dangers to financial stability, as yield-chasing market participants enter into heightened levels of risk, the bank said today. This could lead to sudden corrections in asset prices, it cautioned.
"The longer the low interest rates last, the larger the undesired side-effects and the risks to financial stability," Dombret said.
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Anticipate EURUSD to move lower today, as we didn’t have enough strangh to break through Wednesday’s high (1.3497). That view is supported by flag pattern that reached 38,2% retracement where noticable supply zone can be defined. Primary look at 1.3409-27 as a zone that should be broken in order to validate bearish flag and continue downward move at least to 1.3300. In case currency pair moves up watch price action at 1.3500 and 1.3520. Further updates at mentioned levels.
Eurozone Inflation Confirmed At 0.7%
Eurozone inflation slowed to 0.7 percent in October, as initially estimated, from 1.1 percent in September, final data from Eurostat showed Friday.
The rate was the lowest since November 2009. Moreover, it has remained below the European Central Bank's target of 'below, but close to 2 percent' for the ninth month in a row.
Month-on-month, consumer prices were down 0.1 percent in October, the statistical office said.
At the same time, core inflation that excludes energy, food, alcohol and tobacco prices, slowed to 0.8 percent from 1 percent. The core rate also matched economists' expectations.
Inflation in the European Union came in at 0.9 percent in October, down from 1.3 percent a month ago.
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