Eur/usd - page 119
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EUR/USD forecast for the week of June 30
The EUR/USD pair broke higher during the course of the week, but still remains stuck in the consolidation area we have been in for several weeks now. It is not until we get above the 1.37 level of that we feel comfortable buying this market on more of a longer-term move. A break down below the 1.35 level since this market much lower, probably looking for the 1.33 handle, or perhaps even as low as the 1.31 level. In the meantime, we think this market going to be a little bit tight for longer-term traders to be involved in.
Germany Set to Avoid New Borrowing Next Year
First Time Since 1969 Federal Government Won't Take on New Debt, According to Draft
The German government won't take on new debt in 2015—the first time since 1969 it has avoided doing so, according to draft budget figures, as Berlin seeks to demonstrate the benefits of structural economic changes to its struggling euro-zone partners.
Germany has become Europe's growth engine with solid finances over the past few years, after a social-welfare overhaul implemented 10 years ago helped the country to boost economic and job growth.
"A balanced budget is the fundamental basis on which stable economic growth can strive," a senior finance ministry said during a briefing Friday on the budget. "We not only put great emphasis on a balanced budget, but also on a growth-friendly spending structure."
The draft budget figures, seen Friday by The Wall Street Journal, will be presented by Finance Minister Wolfgang Schäuble to the cabinet on Wednesday.
The plans earmark federal spending of €299.5 billion ($409 billion) compared with this year's target of €296.5 billion. Last year, the federal government spent €307.8 billion.
The budget plans are based on growth assumptions of 1.8% for this year and 2% for 2015.
"It is no accident—there is a correlation—that we aren't only an anchor of stability in Europe but also a growth engine," Mr. Schäuble said Friday in the lower house of parliament as it approved the government's spending plan for 2014.
Germany has posted a national balanced budget since 2012 and is on track to reduce the ratio of debt outstanding to gross domestic product, which still exceeds the 60% threshold set under European Union rules known as the Stability and Growth Pact.
The finance ministry said Germany has achieved a "change in trend," forecasting the debt rate to reach 76% of GDP this year and to fall below 70% by the end of 2017 and below 60% within the next 10 years.
However, the draft budget is less ambitious in aiming to reduce the country's overall debt pile, which reached €2.07 trillion in 2012. Next year, around €27 billion will go into debt-servicing costs alone.
"We don't aim to reduce the pile of debt," the finance ministry official said.
Instead, the government decided to spend more on research and education, as well as social-welfare programs over the coming years, the official said.
Still, the government plans to pay out €153.05 billion—more than half of its total budget—for social security and health support. It has earmarked €10.8 billion on investment in transportation and €21.3 billion on education and research.
Overall spending is targeted to reach €310.6 billion in 2016, €319.9 billion in 2017 and €329.3 billion in 2018, with the government planning to take up no new debt during these years as well.
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EUR/USD Forecast Jun 30-Jul 4
EUR/USD did not go too far in the last full week of the quarter, and remained in range. It might be just the time now for the pair to pick a direction: the ECB meeting is undoubtedly the highlight of the week, yet also inflation numbers will eb closely watched. Here is an outlook on the highlights of this week and an updated technical analysis for EUR/USD.
Forward looking PMIs in the euro-zone fell short of expectations, especially in France. Germany is not doing too well either, with a drop in the IFO Business Climate. However, German inflation is finally moving up and this could calm the ECB. In the US, there seems to be an even clearer separation between the horrible first quarter (as reflected in a 2.9% annualized contraction of GDP) and the more upbeat economic activity in Q2, as seen in strong home sales and consumer confidence.
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EUR/USD weekly outlook: June 30 - July 4
The euro moved higher against the broadly weaker dollar on Friday as concerns over the outlook for U.S. economic growth continued to weigh, despite a report showing that U.S. consumer sentiment improved this month.
EUR/USD ended Friday’s session at 1.3649, up 0.28%. For the week, the pair added 0.43%.
The pair is likely to find support at 1.3600 and resistance at 1.3670.
The dollar remained lower after data on Friday showed that the final reading of the University of Michigan's consumer sentiment index rose to 82.5 this month from 81.9 in May, compared to expectations of 82.2.
The report did little to alter expectations that the Federal Reserve will keep rates on hold for an extended period after data earlier in the week showed that U.S. first quarter growth was revised sharply lower.
The dollar weakened across the board after the Commerce Department said Wednesday that the economy contracted at an annual rate of 2.9% in the first three months of the year, compared to the consensus forecast for a decline of 1.7%.
U.S. first quarter GDP was initially reported to have increased by 0.1%, but was subsequently revised to show a contraction of 1.0%.
The dollar came under additional pressure after data on Thursday showed that U.S. consumer spending rose by just 0.2% in May, below forecasts for 0.4%.
The euro was flat against the yen late Friday, with EUR/JPY at 138.45, and ended the week down 0.22%.
The yen was boosted after stronger-than-forecast data on Japanese retail sales for May curbed expectations for additional monetary easing by the Bank of Japan.
In the week ahead, investors will be looking to the U.S. nonfarm payrolls report on Thursday for further indications on the strength of the labor market, while Monday’s euro zone inflation report will also be in focus, ahead of the European Central Bank’s policy meeting and press conference on Thursday.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
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Eurozone growth stalls, France lags, deflation threatens
Europe's fragile recovery is stalling, a batch of economic data showed this week, with analysts warning that France, with the eurozone's second-biggest economy, could be slipping into another downturn.
Even the eurozone's economic powerhouse Germany -- whose performance is increasingly divergent from laggard France -- is starting to show signs of slowing growth and posted the lowest inflation for four years at 0.9 percent.
This adds to concerns that the spectre of eurozone deflation is coming closer.
Just a month ago, EU Economic Affairs Commissioner Siim Kallas sounded the all-clear for the bloc's economic health, saying that a "recovery has taken hold".
With Portugal joining Ireland in exiting a billion-euro bailout programme, and even Greece successfully raising money on the markets, the eurozone was looking to put its debt crisis behind it.
- France lags -
Analysts have backed this up from the standpoint of monetary policy, saying that decisions by the European Central Bank in the last two years to underpin the eurozone debt market have doused the debt crisis.
But, almost as quickly, data has emerged suggesting that the fallout from that crisis still weighs heavily on confidence, investment and growth.
The outlook for the French economy suffered several setbacks this week: official data showed a high payments deficit, a leading survey suggested that output is shrinking, and the state statistics agency forecast weaker growth than expected for 2014.
On Friday, the agency said the economy stagnated in the first quarter, and on Thursday official data showed a new rise in unemployment to a record 3.388 million people.
"France risks getting left behind in the eurozone economic recovery," said Christian Schulz, a Berenberg bank analyst.
"While the former crisis countries in the south have caught up with the Eurozone average in sentiment indicators, France has fallen behind," he said, referring to a survey on overall eurozone business activity.
The survey found that leading indicators across the zone had slipped from 53.5 points on the index in May to 52.8 points in June, still above the 50-point expansion level, but a setback at a point in the recovery cycle when it should be rising.
Chris Williamson, the chief economist at Markit Economics, which ran the survey, said: "France appears to be entering a renewed downturn after GDP (gross domestic product) stagnated in the first quarter."
That survey showed business activity in France slumping to 48.0 points from 49.3 points, below the 50-point line which marks the difference between expansion and shrinkage of the economy.
On the other side of the scale, heavyweight Germany was still in expansion territory, at 54.2 points.
- 'Eurozone's main engine sputtering' -
But even Germany was starting to flag, as the Ifo economic institute's closely-watched business climate index tumbled to a six month low in June.
It was also the third drop in four months.
"The further decline in expectations suggests that businesses have been unimpressed by the ECB's recent actions and bodes ill for actual activity in the coming months," said Capital Economics economist Jennifer McKeown.
"These early signs of a slowdown are a disappointing indication that the eurozone's main engine is sputtering long before the region's spare capacity has been eroded.
"This adds to the risk of deflation in the single currency area," she added.
Inflation has been weak across the bloc: as well as hitting a four-year-low in Germany, it is unduly weak in Spain and Italy.
The trend of low inflation had pushed the ECB to roll out an unprecedented package of measures early in June, including negative interest rates, as it sought to head off the spectre of deflation, a potentially crippling downward spiral of falling prices.
Analysts warn that the threat of deflation, which can delay investment and household purchases, cut demand and raise unemployment, still lurked.
Bank of America Merrill Lynch analysts see the biggest danger for Spain, Ireland and Portugal, followed by Italy, France and Germany.
"Market-based measures of inflation expectations seem to be stabilising at very low levels while firms are not displaying signs of a changed perception of their pricing power," they said.
Tom Rogers, senior economic advisor at EY Eurozone Forecast, also cited deflation as a "significant risk".
"Although the ECB remains alert to the threat of deflation, some governing council members' aversion to the use of unconventional measures such as quantitative easing suggests that the ECB will remain loathe to taking more decisive action," he said.
At Capital Economics in London, senior European economist Jennifer McKeown commented that the latest EU business and consumer survey "adds to signs that the eurozone recovery could be nearing a peak when it has hardly begun".
This, together with weak inflation, would raise pressure on the ECB which was likely eventually to resort to a "full-blown" programme of quantitative easing, she said, meaning a programme to buy up government debt.
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Decoding Draghi: Banks Still Puzzle Over ECB Grand Plan
Mario Draghi’s latest stimulus tool contains a hidden message: If you think interest rates will rise before 2018, take the money now.
The European Central Bank president has offered lenders a fresh round of cash for as long as four years to keep them afloat and make them support an economic recovery by encouraging lending. He’s also inviting bets on when the ECB will scale back its ultra-loose monetary policy -- the more a bank expects borrowing costs will rise over the term, the more attractive the loan looks.
Four weeks after the ECB unveiled an unprecedented plan for boosting the euro area’s floundering revival, economists and investors are still grappling with its intricacy. While Draghi is trying to reassure investors that the ECB will keep policy loose for longer than the U.S. Federal Reserve and Bank of England, the link between the size of stimulus now and the prospect of higher rates later is a reminder that cheap money won’t be around forever.
“Draghi’s latest move has stepped up the complexity of monetary policy, though simpler options exist,” said Andrew Bosomworth, managing director at Pacific Investment Management Co. in Munich. “I’d reserve judgment until we see results from the economy, but if I were trying to make a guess, it would be a 50-50 call whether it’s going to work or not.”
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French debt reaches 93.6% of GDP in first quarter
France's public debt rose 45.5 billion euros ($61.0 billion) in the first quarter of 2014 bringing the country's total public debt to 93.6% of economic output, statistics agency Insee said Monday.
Public debt in the euro zone's second-largest economy reached EUR1.96 trillion in the first quarter, mainly due to an increase in the central state's debt, the statistics agency said.
The state auditor the Cour des Comptes said earlier in June that France's public debt will rise to over EUR2 trillion this year, even if the government succeeds in delivering on its deficit reduction plans.
Euro-zone inflation unchanged at 0.5% in June
Inflation in the euro zone remained stable at 0.5% in June from the same level in May, missing forecasts of a 0.6% reading ahead of the European Central Bank meeting on Thursday. The preliminary data for June from Eurostat, released on Monday, showed the weak inflation level largely was due to food, alcohol and tobacco prices, which fell 0.2% in June, compared with a rise of 0.1% in May. Prices were flat in the industrial-goods sector compared with a year ago. The euro was broadly unchanged after the release at around $1.3665
Can EURUSD maintain its bid beyond quarter end?
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Forex Trading Outlook for June 30, 2014 - YouTube
price keep breaking resistance after another on today trade i guess we can see 1.37 levels at this rate soon