Eur/usd - page 80
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EUR/USD weekly outlook: March 31 - April 4
The euro inched higher against the dollar on Friday, pulling back from one-month lows as market sentiment was bolstered by indications that China is prepared to do more to shore up the cooling economy.
EUR/USD edged up 0.07% to settle at 1.3752, recovering from lows of 1.3702. The pair ended the week down 0.61%.
The pair was likely to find support at 1.3702 and resistance at 1.3800.
Risk appetite was boosted after China's premier Li Keqiang said Friday the country has policies in place to counter economic volatility. The remarks eased concerns over recent signs of a slowdown in the world’s second-largest economy.
The common currency remained under pressure after European Central Bank officials indicated earlier in the week that they are considering fresh policy options to stave off the risk of deflation in the region.
ECB governing council member and Bundesbank head Jens Weidmann said Tuesday that a negative deposit rate could be an appropriate way to address the impact of strong gains in the euro.
The same day ECB President Mario Draghi that the central bank stood ready to act if inflation slipped lower than the ECB expected.
Data on Friday showing that the annual rate of inflation in Spain slipped 0.2% in March fuelled concerns that deflation could threaten the economic recovery in the euro area. A separate report showed that the annual rate of inflation in Germany slowed in March.
Elsewhere, the euro was higher against the yen on Friday, with EUR/JPY advancing 0.71% to 141.40, up from an almost one-month trough of 139.95.
German fin min expects ECB rates to rise: Der Spiegel
Germany's finance ministry expects borrowing costs to rise next year as the European Central Bank will hike interest rates in response to an economic recovery, Der Spiegel magazine reported on Sunday, citing an internal document.
With the euro zone debt crisis receding and the economy picking up, "an active contribution towards overcoming the low interest rate policy is to be expected" from the ECB, the magazine quoted the ministry document as saying.
The ECB has kept interest rates at a record low of 0.25 percent since November and is expected hold them at that level at its next policy meeting on Thursday.
But the focus of debate in the region has been on whether the ECB will provide more rather than less monetary stimulus - given concern over whether falling rates of euro zone inflation could usher in an economically damaging period of deflation.
Even if inflation does begin to pick up, the bank has said it would keep rates at the current level or lower well into the recovery.
Der Spiegel reported that in view of a possible future rate hike, Europe's biggest economy would in a year's time have to pay more for its credit than it does now.
According to the document, borrowing costs could rise to more than 2 percent for 10-year Bunds from about 1.5 percent now.
Currently, Germany is profiting from ultra-low refinancing costs.
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Euro Near 1-Month Low Before CPI
The euro traded near a one-month low before data today that analysts said will show inflation slowed in the region, boosting bets the European Central Bank will signal stimulus measures at a policy meeting this week.
The dollar climbed to a two-week high versus the yen before Federal Reserve Chair Janet Yellen speaks and ahead of figures tomorrow forecast to show U.S. manufacturing strengthened this month. Australia’s currency pared an advance in March against all Group-of-10 peers before a Reserve Bank policy decision tomorrow at which economists expect officials to refrain from lowering borrowing costs for a third-straight time this year.
“If the euro area’s inflation estimate comes in below consensus, it’ll feed speculation of further easing,” said Toshiya Yamauchi, a senior analyst in Tokyo at Ueda Harlow Ltd., which provides margin-trading services. “The euro could drop below $1.37.”
The euro was little changed at $1.3756 as of 8:35 a.m. London time after reaching $1.3705 on March 28, the lowest since Feb. 28. It is little changed against the greenback since Dec. 31. Europe’s shared currency advanced 0.2 percent to 141.71 yen, set for a 2.1 percent drop this quarter.
The dollar rose 0.1 percent to 102.97 yen after reaching 103 yen, the most since March 12. It has fallen 2.2 percent against its Japanese counterpart this year.
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Euro-zone inflation falls to 0.5% – EUR/USD falls
CPI inflation in the euro-zone was expected to drop from 0.7% to 0.6% in the preliminary numbers for March. Core inflation was predicted to slide from 1% to 0.8%. The numbers are critical for the ECB rate decision on Thursday.
EUR/USD traded around 1.3740 before the publication. — more coming –
On Friday, Germany reported lower than expected inflation numbers on all fronts, with HICP falling to only 0.9%. The weakness joined dovish comments that were heard earlier from various ECB members.
Support lies at 1.3740 followed by 1.37. Resistance is at 1.38 and 1.3830
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Sharp fall in eurozone inflation heaps pressure on ECB
Eurozone inflation fell to 0.5 percent in March, official data showed on Monday, the lowest rate since the financial crisis, stoking fears the bloc could be heading for a damaging cycle of deflation.
Inflation in the currency bloc has trended steadily lower in recent months, coming in well below the European Central Bank target rate of just under 2.0 percent.
The latest figure, the lowest since late 2009, comes just ahead of an ECB policy meeting on Thursday and heaps pressure on the central bank to do something to reverse the trend.
By component, food, alcohol and tobacco prices rose 1.1 percent in March, after rising 1.5 percent in February, but energy costs were down 2.1 percent, after a fall of 2.3 percent in February, the Eurostat statistics agency said.
Ben May, economist at Capital Economics, said the latest fall was partly due to temporary factors, including last year's early Easter, which was affecting the year-to-year rate.
"Nonetheless, the weakness of inflation suggests that the ECB may have little option but to take further policy action," he said.
The danger is that a broad, sustained decline in prices can lead people to postpone purchases in the hope that prices will tumble even further, resulting in a vicious circle from which escape is difficult.
Inflation is even falling in Germany, the bloc's biggest economy, where at one percent, the rate was at its lowest level in more than three years in March.
And in crisis-hit Spain, consumer prices actually fell 0.2 percent in March after only crawling 0.1-percent higher the previous month.
Italy's annual inflation rate also slowed to its slowest pace since October 2009 at 0.4 percent.
Until this latest data, the ECB was not expected to announce any new measures on Thursday, given recent data suggesting the bloc's economy is in a tentative recovery.
But for Christian Schulz, head economist at Berenberg Bank, "the after-effects of the euro crisis continue to drive down eurozone inflation and maintain the pressure on the ECB to stimulate the economy."
ECB officials have repeatedly said they see no threat of deflation, even though president Mario Draghi reiterated last week that the central bank stood ready to act if necessary.
"If any downside risks to (our inflation) scenario appear, we stand ready to take additional monetary policy measures that ensure our mandate is fulfilled," Draghi told a conference in Paris.
"In other words, we will do what is needed to maintain price stability," Draghi insisted.
The ECB has held its key "refi" refinancing rate at an all-time low of 0.25 percent since November.
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Germany ILO Jobless Rate Steady In February
German unemployment rate remained unchanged in February from the previous month, figures from the Federal Statistical Office showed Tuesday.
The adjusted jobless rate, based on the ILO guidelines, was 5.1 percent in February, unchanged from January's figure, which was revised from 5 percent. A year ago, the figure was 5.4 percent.
The number of unemployed on an adjusted basis was 2.17 million in February, slightly below January's 2.19 million.
The number of employed grew 0.1 percent to 40.65 million. From the same month last year, the figure rose 1.2 percent.
On an unadjusted basis, the jobless rate was 5.5 percent in February, down from 5.6 percent in January. The number of unemployed fell to 2.35 million from 2.39 million in the previous month. The number of employed grew 0.7 percent to 40.48 million.
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Euro zone unemployment rate holds steady at 11.9% in February
The euro zone’s unemployment rate held steady just below a record-high in February, underlining concerns over the region’s growth prospects, official data showed on Tuesday.
In a report, Eurostat said that the euro zone’s unemployment rate held steady at a seasonally adjusted 11.9% in February, unchanged from January and compared to expectations for a reading of 12.0%.
The data showed that among the member states, the lowest unemployment rates were recorded in Austria (4.8%), Germany (5.1%) and Luxembourg (6.1%), and the highest in Greece (27.5% in December 2013) and Spain (25.6%).
Following the release of the data, the euro held on to modest gains against the U.S. dollar, with EUR/USD easing up 0.19% to trade at 1.3797.
Meanwhile, European stock markets remained higher. The Euro Stoxx 50 rose 0.3%, France’s CAC 40 added 0.6%, Germany's DAX edged 0.4% higher, while London’s FTSE 100 inched up 0.45%.
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Euro Firm After Yellen’s Dovish Comments
EUR/USD has edged higher on Tuesday, as the pair trades just shy of the 1.38 line in the European session. In economic news, Federal Reserve chair Janet Yellen surprised the markets when she said that the US economy would require monetary stimulus for some time. It’s a busy day in the Eurozone. PMI releases met expectations, while German Unemployment Claims beat the estimate for a fourth straight time. There was more good news, as the Eurozone Unemployment Rate dropped below the 12.0% rate for the first time since February 2013. Today’s highlight in the US is ISM Manufacturing PMI.
EUR/USD Sentiment
German Unemployment Change improves: German data continues to look solid. February’s German Unemployment Change continues to show improvement, as the indicator dropped to -12 thousand, down from -14 thousand a month earlier. German Consumer Climate and Business Climate also looked sharp in February, pointing to stronger confidence in the German economy, the largest in the Eurozone.
Yellen says US economy has long way to go: On Monday, Fed chair Janet Yellen said that “considerable slack” remained in the US economy and this would require further stimulus measures. Currently, the Fed is purchasing $55 billion in assets under its QE scheme. There have been three tapers to QE so far, and Yellen plans to wind up the program in the fall, provided that the US economy does not run into any serious turbulence. At the same time, the Federal Reserve has stated that its has no plans to raise interest rates until sometime in 2015.
ECB mulls negative rates, QE: Last week, German Bundesbank head Jens Weidmann gave support to a negative deposit rate in order to respond to the strong euro. He also raised the possibility of a QE scheme for the ECB, whereby the central bank would purchase loans or other assets in order to fight deflation, which continues to suffer from low inflation. Mario Draghi also spoke on the issue, saying that the ECB is ready to act if inflation slips further.
Ukraine gets critical cash: Ukraine’s economy is in shambles as a result of the four-month political crisis. Prime Minister Arseniy Yatsenyuk acknowledged that the country is on the edge of bankruptcy, and GDP could drop by 3% this year. However, help is on the way. The IMF is set to sign a two-year loan of up to $18 billion, and the EU has offered a package of EUR 11 billion. Ukraine has already received two bailouts from the IMF since 2008, and will have to implement budget cuts and other measures in order to receive the new package from the IMF.
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EUR/USD gains as U.S. factory data misses forecasts
The dollar slumped against the euro on Tuesday after a key U.S. factory gauge disappointed investors, who continued to digest Federal Reserve Chair Janet Yellen's dovish Monday comments suggesting policy will remain loose for some time to come.
In U.S. trading, EUR/USD was up 0.28% at 1.3809, up from a session low of 1.3769 and off a high of 1.3816.
The pair was likely to find support at 1.3705, Friday's low, and resistance at 1.3876, the high from March 24.
The Institute for Supply Management reported earlier that its manufacturing purchasing managers' index rose to 53.7 in March from 53.2 in February, missing market expectations for a 54.0 reading.
The report showed that employment growth slowed, with the employment index falling to 51.1 from 52.3, the lowest level since June 2013.
The numbers weakened the dollar as investors avoided the greenback ahead of Friday's March jobs report, which many feel may depict and improving albeit sluggish U.S. economy, one still in need of Federal Reserve stimulus support.
On Monday, Fed Chair, Yellen said in a speech that the U.S. economy still needs monetary support to ensure more sustained recovery.
"I believe it is appropriate for the Federal Reserve to continue to provide substantial help to the labor market, without adding to the risks of inflation, is because of the evidence I see that there remains considerable slack in the economy and the labor market," Yellen said in prepared remarks of her speech.
The Fed is currently purchasing $55 billion in bonds a month to spur recovery, a monetary policy tool known as quantitative easing that suppresses interest rates to prop up the economy, weakening the dollar as a side effect.
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Spanish jobless claims fall by 16,600 in March
The number of unemployed people in Spain declined more than expected in March, easing concerns over the health of the euro zone’s fourth largest economy, official data showed on Wednesday
In a report, Spain’s Employment Ministry said the number of unemployed people fell by a seasonally adjusted 16,600 last month, compared to expectations for a decline of 5,300. The number of unemployed people fell by 1,900 in February.
Following the release of the data, the euro held on to gains against the U.S. dollar, with EUR/USD inching up 0.11% to trade at 1.3808.
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