Eur/usd - page 87
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Italy's industrial orders declined for a second time in three months in February, data from the statistical office Istat showed Friday.
Industrial orders dropped 3.1 percent from a month ago as both domestic and foreign demand deteriorated in February. The decline reversed January's revised 4.7 percent increase.
Domestic demand decreased 2.2 percent and foreign orders slid 4.4 percent in February.
At the same time, industrial turnover fell by seasonally adjusted 1.5 percent from January, when it was up 1.2 percent. Domestic sales were down 1.8 percent and non-domestic market turnover fell 0.7 percent.
On a yearly basis, industrial orders advanced 2.8 percent and turnover gained 1.2 percent in February.
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EUR/USD down at the end of U.S. session
The Euro was lower against the U.S. Dollar on Friday.
EUR/USD was trading at 1.3810, down 0.03% at time of writing.
The pair was likely to find support at 1.3791, Tuesday’s low, and resistance at 1.3864, Thursday’s high.
Meanwhile, the Euro was up against the British Pound and down against the Japanese Yen, with EUR/GBP gaining 0.001% to hit 0.8226 and EUR/JPY falling 0.05% to hit 141.41.
Italy Lowers Income Tax To Revive Economy
Italy's government lowered tax on low income earners so as to boost household income and domestic demand.
Prime Minister Matteo Renzi on Friday said the reduction will help about 10 million tax payers.
He said the move will reduce taxes by around EUR 80 per month, starting May, for people earning less than EUR 26,000 a year.
The government will also reduce business taxes moderately this year. Further, he outlined EUR 6.9 billion worth measures to ease the burden on the public finances.
Renzi is under immense pressure from EU countries to bring the budget deficit to 3 percent of GDP. The government estimates the economy to grow 0.8 percent this year.
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EUR/USD Forecast Apr. 21-25
EUR/USD fell lower on a Sunday gap and could never retake the previous levels. Will the attempts to talk down the euro succeed? PMIS and a speech from ECB president Mario Draghi are the key events. Here is an outlook on the highlights of this week and an updated technical analysis for EUR/USD.
Draghi made his mark once again: he tied further monetary stimulus to the value of the euro. His weekend comments opened a gap lower that was never closed. Pressure on the euro also came from the miss in the German ZEW figure and also from the downwards revision of core CPI for March, which is now at its lowest level post-crisis level. Data in the US was mostly positive, with an encouraging jobless claims figure and better than expected retail sales, although more evidence is needed to convince everybody in the spring bounce theory.
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Economic Data Holding Back Euro as ECB Pleads for Weaker FX Rates
Fundamental Forecast for Euro: Bearish
- The ECB continues to try and talk down the Euro, but there has been little if any success thus far.
- With the retail trading crowd still heavily long the US Dollar, the Euro remains in the driver’s seat.
- Have a bullish (or bearish) bias on the Euro, but don’t know which pair to use? Use a Euro currency basket.
Despite the continued and prevalent threat of aggressive dovish policy action by the European Central Bank, the Euro remained buoyant against its major counterparts for the second straight week as volatility strikes every other major asset class around the world expect for FX. Rollercoaster tensions in Eastern Europe between Russia and Ukraine have done little if anything to dissuade traders from staying long the Euro, though the persistent disappointment in Euro-Zone economic data has rarely allowed for a substantial rally either.
The viability of the ECB’s seemingly scattered dovish monetary policy could be put to the test this week amid a light stream of economic data. The ECB’s approach to preparing the market for a round of quantitative easing – ideally coming after the November banking stress tests (AQR) so as to not confuse the market with a massive liquidity injection while the ‘health check’ is still under way – has proven less unified over the past several days.
Evidently, the ECB wants to have its cake and eat it too: it is threatening action but doesn’t want to ever have to pull the trigger; it expects market participants to comply with its demands for a weaker currency just as the market did for a stronger currency when it lifted the Euro up from the depths of the Euro-Zone financial crisis on the back of ECB President Mario Draghi’s “whatever it takes” to save the Euro promise in July 2012.
There’s little reason for traders, at present time, to comply with the ECB’s demands. As we’ve previously mentioned in this weekly note, Euro bears have simply been on the losing side of the trade even after the ECB cut its main deposit rate to 0.25% in November 2013. Since November 7, EURAUD is up by +4.11%; EURJPY has gained +6.97%; and EURUSD has appreciated by +2.85%. The best performer versus the Euro over the same time period, the British Pound, has only gained +1.35%. Simply put, even the ECB’s conventional policy tool (interest rate changes) has failed to dissuade Euro appreciation. More is needed than further jawboning.
Fortunately for the ECB, the economic data backdrop has been disappointing enough so as to prevent a further push by EURUSD through $1.4000, apparently a threshold of pain for the ECB given the recent rise in dovish rhetoric on approach to the big round figure. As a proxy for momentum of economic data (better or worse than expectations), the Citi Economic Surprise Index has fallen to -10.6 by this week’s end, a yearly low for 2014.
With the incoming economic data slate set to show a slight deterioration in the Euro-Zone’s growth prospects in both the core economies – Germany and France – the ECB’s pleas for weaker FX rates might be heard a little more clearly this week. The Markit PMI surveys across the board are set to show slight deteriorations in the rate of growth (positive but at a slower pace), which should help keep the Euro in its state of indecision, having stayed within +/-0.50% of six of the major currencies thus far through April.
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France Steps Up Pressure on ECB to Tackle Low Inflation
PARIS—France stepped up pressure Thursday on the European Central Bank to take measures against low inflation, with economy minister Arnaud Montebourg calling for looser monetary policy in return for governments bringing down their budget deficits.
Mr. Montebourg, who has repeatedly criticized ECB policy in recent years, although with little apparent effect, launched the fresh attack even after officials at the bank have stepped up their own rhetoric by saying they are ready to take action against low inflation.
"In the interest of Europe and France we want something in exchange for cutting deficits," Mr. Montebourg said in an interview in Thursday's edition of French daily Les Echos. "The national foot soldiers that are making an effort to repair their public finances must be helped with aerial support from the ECB."
A spokeswoman for Mr. Montebourg didn't respond to a request for comment. An ECB spokesman declined to comment.
The minister's remarks come as the French government tries to walk a fine line between bringing down deficits and tough austerity measures that would risk splitting the Socialist Party majority in parliament. More leftist members of the Socialist Party have already voiced criticisms of the plans to save €50 billion through 2017, especially the freezes of civil servant pay and welfare benefits.
Mr. Montebourg personifies the divisions as he supports deficit reduction as a member of the government, while hailing from the restless left of the Socialist Party.
"Arnaud Montebourg is doing politics to appeal to the left, and more precisely the left of the Socialist Party and the far left," said Christopher Dembik, Paris-based analyst at Saxo Banque. "He has absolutely no lever to influence the vision of the ECB."
Still, other members of the French government have also publicly pressured the ECB in recent weeks saying a strong euro is hurting the economy by making French goods more expensive on international markets. Many French companies selling their products overseas have cited the negative effect of the strong euro in their revenue reports for the first quarter.
"A euro that is too strong is bad for our growth, our businesses and our jobs," finance minister Michel Sapin said on French radio stationRTL Thursday.
Mr. Montebourg's attacks on the ECB Thursday were also stronger than in the past. The French minister said the ECB isn't respecting its mandate at present because inflation has fallen far below the 2% target.
"The ECB has fought so much against inflation that we are now in deflation," he said in the interview with Les Echos.
ECB officials deny the euro zone is in deflation, defined as a period of falling prices, but say the central bank is ready to act against low inflation.
"Unconventional monetary policy is the solution to our problems," Mr. Montebourg said.
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Spain banks' bad loans ratio 13.4 pct in February
Spanish banks' bad debts as a percentage of total loans dipped slightly to 13.4 percent in February compared with 13.5 percent in December as both bad loans and total lending dropped.
Total credit in the financial system was 1.453 billion euros ($2 billion) in February, down from 1.458 billion a month earlier, data from the Bank of Spain released on Monday showed.
Bad loans dropped to 195 million euros from 197 million euros a month earlier, after hitting a record high in December.
Spanish banks, crippled with sour assets after a prolonged property bubble burst in 2008, mostly forecast that bad loans will peak this year as the country pulls out of recession and lending picks up again. ($1 = 0.7228 Euros) source
France Leading Index Falls In February: Conference Board
The Conference Board's leading economic index for France declined in February, after increasing in the previous four months, data showed Friday.
The recent behavior of the composite indexes suggests that France's economy is likely to moderately improve through the first half of 2014, the Conference Board said.
The leading economic index dropped 0.3 percent in February, following a 0.4 percent increase in January, the think-tank said. In December, the index rose 0.3 percent.
Declines in new unemployment claims and building permits were the main reasons behind the latest fall in the leading index.
The coincident index, which measures the current economic situation, rose 0.1 percent in February, reversing a 0.1 percent decline in January. In December, the index increased 0.1 percent.
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EURUSD: With the pair closing lower the past week, a continuation of that weakness is envisaged in the new week. Support lies at the 1.3779 level where a break will aim at the 1.3737 level followed by the 1.3676 level.
Further down, support stands at the 1.3600 level where a violation will target the 1.3550 level. Its daily RSI is bearish and pointing lower supporting this view. Conversely, medium term outlook on EUR remains higher but will have to recapture the 1.3966 level to annul its present bear pressure.
Further out, resistance resides at the 1.4000 level, its big psycho level. All in all, EUR remains biased to the upside in the long term but faces corrective weakness threats.
Growing threat of ECB action keeps euro subdued
The euro hovered near a two-week low against the dollar on Tuesday and fell to a two-month low against the British pound, as expectations the ECB will try to halt any further strengthening kept investors away from the single currency.
European Central Bank President Mario Draghi recently made clear the euro's strength is a possible trigger for the central bank to ease monetary policy. He is scheduled to give a keynote speech in Amsterdam on Thursday.
ECB executive board member Benoit Coeure said on Tuesday that there was further margin to reduce the main interest rate below 0.25 percent and that the strength of the euro could be keeping inflation too low.
But until the ECB takes action, traders said the euro was unlikely to weaken much, thus keeping it tied to a range.
The euro, which slipped to a two-week low of $1.3785 earlier in the day was trading slightly higher at $1.3815 amid low volumes as traders returned from the long Easter weekend. It was down 0.1 percent against the pound at 82.01 pence, its lowest level since late February.
Investors are also awaiting euro zone 'flash' PMI surveys on Wednesday while the German IFO institute's monthly reading of business sentiment in Europe's largest economy is due a day later.
Last week, the monthly German ZEW poll showed investor and analyst sentiment falling for the fourth month in a row in April due to the crisis in Ukraine, and another set of subdued economic data could add to pressure on the ECB to ease.
"Euro/dollar is likely to trade with a weaker bias this week given the German IFO and Draghi's speech coming up," said Yujiro Goto, currency analyst at Nomura. "Any downside will be limited though, as investors will await the inflation data due next week."
Very weak inflation in the euro zone, due partly to the strong exchange rate, has raised pressure on the ECB to further loosen monetary policy to stimulate growth.
In the past few weeks Draghi has brought the currency into focus and warned that any further strengthening could lead the euro zone's central bank to use unconventional tools such as asset purchases.
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