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EUR/USD gains as dollar slips on mixed U.S. data
The dollar softened against the euro on Monday as mixed data out of the U.S. prompted investors to avoid the greenback and jump to the sidelines to await the release of the June jobs report later this week.
In U.S. trading, EUR/USD was up 0.31% at 1.3692, up from a session low of 1.3640 and off a high of 1.3698.
The pair was likely to find support at 1.3576, Thursday's low, and resistance at 1.3723, the high from May 21.
Soft regional manufacturing data offset upbeat housing data and prompted investors to avoid the greenback
The National Association of Realtors reported earlier that pending home sales jumped 6.1% in May from April, rising to its highest level since last September. May's figure marked the largest increase since August 2010 and far surpassed forecasts for a 1.5% reading.
Still, the dollar slipped after industry data released earlier revealed that the Chicago purchasing managers’ index declined to 62.6 this month from 65.5 in May, missing expectations for a 63.0 reading.
Investors were turning their attention to the U.S. June nonfarm payrolls report, which will release a day early on Thursday due to the Independence Day holiday on Friday, avoiding the dollar during the trading session to await the jobs report as well as a key manufacturing gauge on Tuesday.
Meanwhile in Europe, the euro saw support after preliminary data revealed that the euro zone's annual inflation rate remained unchanged at 0.5% in June, easing pressure on the European Central Bank to announce fresh monetary easing measures.
It was the ninth consecutive month in which the inflation rate was below 1%. The ECB targets an inflation rate of close to but just under 2.0%.
The core inflation rate ticked up to 0.8% from 0.7% in May.
The ECB announced a package of measure aimed at staving off the threat of deflation on June 5, including cutting rates to record lows and imposing negative rates on lenders to encourage lending to consumers.
Elsewhere, the euro was down against the pound, with EUR/GBP down 0.05% at 0.8004, and up against the yen, with EUR/JPY up 0.14% at 138.65.
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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.
read more
German manufacturing PMI 52.0 vs. 52.4 forecast
Germany’s manufacturing PMI fell unexpectedly last month, data showed on Tuesday.
In a report, Markit Economics said that German manufacturing PMI fell to a seasonally adjusted 52.0, from 52.4 in the preceding month.
Analysts had expected German manufacturing PMI to remain unchanged at 52.4 last month.
German jobless claims rise by 9,000 in June
The number of unemployed people in Germany rose for the second consecutive month in June, while the country’s jobless rate held steady at a record low, official data showed on Tuesday.
In a report, Germany's Federal Statistics Office said the number of unemployed people increased by a seasonally adjusted 9,000 this month, disappointing expectations for a drop of 10,000. Jobless claims in May rose by 25,000.
The report showed that Germany’s unemployment held steady at 6.7% in June, in line with expectations and unchanged from April.
Following the release of the data, the euro was lower against the U.S. dollar, with EUR/USD shedding 0.02% to trade at 1.3690.
EURUSD broke higher during yesterday session, slamming into the 1.37 handle. This is an area that’s been significant resistance previously, so it makes sense that the market stopped right there. However, the fact that we are closing out the top of the range suggests that the market may attempt to break out to the upside
EUR/USD little changed after U.S. ISM report
The euro was little changed near 5-week highs against the dollar on Tuesday after the Institute for Supply Management reported that the U.S. manufacturing sector expanded at a slower than expected rate last month.
EUR/USD was at 1.3688, not far from the five-week high of 1.3698 set on Monday.
The pair was likely to find support at 1.3640 and resistance at 1.3725.
The dollar showed little reaction after the ISM said its manufacturing PMI ticked down to 55.3 last month from 55.4 in May. Analysts had expected an increase to 55.8.
Another report showed that the final reading of the Markit U.S. manufacturing PMI rose to 57.3 in June, the highest reading since May 2010. The report showed the fastest growth in output and new orders since April 2010.
Meanwhile, the Commerce Department said construction spending rose 0.1% in May, below the expected 0.5% increase.
The greenback has come under pressure since data last week showing a 2.9% economic contraction in the first quarter bolstered expectations that the Federal Reserve will keep rates on hold for an extended period.
Speaking Monday, San Francisco Fed President John Williams underlined this view, saying the bank will probably need to hold interest rates near zero for at least another year, despite signs that the economy is improving.
Investors were turning their attention to the U.S. nonfarm payrolls report, due to be released one day early on Thursday ahead of the Independence Day holiday, for further indications on the strength of the labor market.
Demand for the euro continued to be underpinned despite data on Tuesday indicating that the manufacturing recovery in the euro area is losing momentum.
Revised data showed that the euro zone’s manufacturing PMI dipped to a seven-month low of 51.8 in June from 52.2 in May. Growth in the German factory sector slowed to an eight month low, while the French manufacturing index fell to a six-month low.
A separate report showed that the region’s unemployment rate ticked down to 11.6% in May, revised from the initial reading of 11.7%.
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Eurozone inflation stays weak at 0.5% in June: Eurostat
Eurozone inflation is still stuck at the lowest levels since the financial crisis, new data showed on Monday, highlighting the threat of deflation but analysts say the ECB is unlikely to ease policy further this week.
Deflation is such a threat that the European Central Bank has moved into negative interest rates to get cash flowing, and authorities are closely watching inflation rates in the hope that it will edge up towards the bank's target.
But the European Union's statistics office Eurostat said in a first estimate that inflation across the 18-nation eurozone was 0.5 percent in June -- the same level as in May.
This means that inflation is at the lowest level since the financial crisis of 2008-2009 nearly froze the market on which banks lend to each other and caused recession in several advanced economies.
ECB data released on Monday also showed that loans to the private sector in the eurozone fell by 2.0 percent in May, even faster than the 1.8-percent drop the previous month.
"June's weak eurozone inflation figure will add to pressure on the ECB to provide more policy support, particularly given recent signs that the recovery may already be slowing," said Capital Economics senior economist Jennifer McKeown.
"While the bank is unlikely to act again at its meeting this week, we think that it will ultimately implement a large scale quantitive easing (bond-buying) programme to tackle the risk of deflation."
Inflation has been far below the ECB's target of just under 2.0 percent, threatening its main statutory obligation to ensure price stability.
Slow growth can be both a cause and consequences of unduly low inflation.
That is why the ECB has lowered its benchmark refinancing rate to 0.15 percent, and moved the deposit rate at which it pays banks for depositing money with it at minus 0.10 percent, meaning the banks are charged if they park money instead of using it.
When inflation rises above 2.0 percent in advanced economies, business and households begin to anticipate further rises, stoking so-called second-round inflation.
But when inflation is much below 1.0 percent for a long time, people delay purchases and investment in the belief that prices will fall further. That cuts demand, can cause recession, reduces demand and growth and increases unemployment in a vicious spiral which is difficult for central banks to reverse.
- Weak outlook -
At the beginning of June, the ECB lowered its forecasts for inflation in the eurozone up to 2016, saying it would be 0.7 percent this year, 1.1 percent next year and 1.4 percent in 2016.
In March, it was forecasting 1.0 percent this year then 1.3 percent and 1.5 percent.
The president of the ECB Mario Draghi said at a press conference after the last meeting of the bank on June 5 that inflation would remain weak in coming months.
The latest data showed that in June, the prices for services in the eurozone rose by 1.3 percent after 1.1 percent in May.
Prices for energy rose by 0.1 percent from zero increase in May. prices for food, alcoholic drinks and tobacco fell by 0.2 percent after an increase of 0.1 percent.
Analysts are divided over the dangers of inflation, with some saying that the eurozone is not seriously at risk, while others warn that with inflation running so low, shocks to economies or in the international economic climate could dent confidence enough to tip the single currency area into deflation.
Some analysts argue the ECB may have to begin a programme of quantitive easing, meaning the purchasing of government debt already issued and traded on the market, as a means of injecting extra cash into the financial system to push up prices.
That would also tend to weaken the euro, which would push up the prices of imported goods such as oil.
"The ECB has just announced new measures to signal its readiness to bring inflation back to target and boost lending, but it will surely keep the door wide open to more measures at this week's meeting," said Christian Schulz, a senior economist at Berenberg.
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we have big news this week i guess it will be wise to wait before making any entry decision
Eurozone Unemployment Rate Unchanged At 11.6%
The Eurozone unemployment rate remained unchanged at an elevated level in May as flattening recovery in the second quarter strain job creation, latest figures from Eurostat revealed Tuesday.
The jobless rate held steady at a seasonally adjusted 11.6 percent in May after April's figure was revised down from 11.7 percent. Economists had forecast the unemployment rate to remain at 11.7 percent.
The number of unemployed decreased by 28,000 from April to 18.55 million. Compared to last May, unemployment declined by 636,000.
Unemployment among youth aged under 25 totaled 3.356 million in May, down 205,000 from a year ago. The youth jobless rate was 23.3 percent in May versus 23.9 percent last year.
March's unemployment data highlighted that the Eurozone's economic recovery is still too weak to erode the significant amount of slack in the labor market, Jessica Hinds, a European economist at Capital Economics said.
Looking ahead, she said the recovery in the labor market looks set to remain painfully slow.
Data from Germany today showed that the unemployment increased for the second consecutive month in June due to a mild winter.
The number of Germans out of work increased by around 9,000 to 2.916 million in June, the Federal Labor Agency said. Compared to last year, there were 32,000 less unemployed in June.
The German jobless rate remained unchanged at a seasonally adjusted 6.7 percent in June, as widely expected by economists.
The overall EU28 jobless rate fell marginally to 10.3 percent in May from 10.4 percent in April. The lowest rates were registered in Austria, Germany and Malta, while Greece and Spain logged the highest rates.
Italy's unemployment rate remained close to a record high in May, Istat reported today. The rate rose to 12.6 percent in May from 12.5 percent in April.
The jobless rate had reached 12.7 percent early this year, which was the highest since records began in 1977.
The Markit Purchasing Managers' survey showed today that Eurozone manufacturing recovery slowed slightly more than initially estimated in June. The final PMI for manufacturing dipped to a seven-month low of 51.8 in June from 52.2 in May and below the earlier flash estimate of 51.9.
Nonetheless, the score remained above 50, extending the recovery to a twelfth successive month in June.
The Purchasing Managers' survey reported a rise in manufacturing employment for the sixth successive month in June, although the rate of growth remained only marginal.
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Spanish jobless claims fall by 122,700 in June, euro little changed
The number of unemployed people in Spain declined more than expected in June, 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 122,700 last month, compared to expectations for a decline of 97,300. The number of unemployed people fell by 111,900 in May.
Following the release of the data, the euro was little changed against the U.S. dollar, with EUR/USD inching up 0.01% to trade at 1.3681.
Meanwhile, European stock markets were mixed after the open. Spain’s IBEX 35 climbed 0.1%, the DJ Euro Stoxx 50 rose 0.1%, France’s CAC 40 fell 0.1%, Germany’s DAX picked up 0.2%, while London’s FTSE 100 tacked on 0.1%.