Eur/usd - page 136
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French manufacturing PMI 47.8 vs. 47.6 forecast
France’s manufacturing PMI rose unexpectedly last month, data showed on Friday.
In a report, Markit Economics said that French manufacturing PMI rose to a seasonally adjusted 47.8, from 47.6 in the preceding month.
Analysts had expected French manufacturing PMI to remain unchanged at 47.6 last month.
Euro zone manufacturing PMI 51.8 vs. 51.9 forecast
The euro zone’s manufacturing PMI fell unexpectedly last month, data showed on Friday.
In a report, research group Markit said the euro zone’s manufacturing PMI fell to 51.8, from 51.9 in the preceding month.
Analysts had expected the euro zone’s manufacturing PMI to remain unchanged at 51.9 last month.
Eurozone Manufacturing Growth Remains Stable In July
Eurozone manufacturing activity growth remained stable at June's seven-month low, final data from Markit Economics showed Friday.
The final seasonally adjusted manufacturing Purchasing Managers' Index came in at 51.8 in July, unchanged from June. The flash score for July was 51.9.
The ongoing expansions in Germany and outside of the big-two economies were partly offset by a deeper downturn at French manufacturers.
At the same time, the German manufacturing sector sustained its growth in July. The Markit/BME manufacturing PMI rose to 52.4 in July from an eight-month low of 52 in June. But the July figure was below the flash estimate of 52.9.
On the other hand, the French manufacturing sector weakened in July, but slightly less than initially estimated.
The headline French PMI dropped to revised 47.8 from 48.2 in June. That was its lowest reading in 2014 so far. Nonetheless, the July score was revised up from 47.6.
EUR/USD forecast for the week of August 4, 2014
The EUR/USD pair initially sold off during the week, but as you can see we ended up bouncing and forming a nice-looking hammer. While this hammer looks like an opportunity to start buying this pair, we are a bit cautious as we recognize that the 1.35 level is in fact an area that should be resistive now. With that being the case, it’s likely that the markets will be a bit difficult to navigate from the longer-term perspective, just as they have for some time now.
That being the case, we feel that a move above 1.35 would of course be very bullish for us, and having us buying this market and aiming for the 1.37 region. That being the case, on a move above there then we are willing to give the Euro a bit of a chance. Ultimately though, we think that this market is probably still going to head towards the serious support level at the 1.33 level, which of course we haven’t touched yet.
That being the case, on a resistant candle at the 1.35 level we be more than willing to sell this market as it should continue the downtrend and head towards that level. We also believe that a break of the bottom of the hammer would in fact be very bearish as well, having us selling for more of a short-term trade. Because of that, it’s difficult to really glean some type of information out of this chart for larger move, but a move above the 1.35 level has us thinking that perhaps we can bounce and potential even go as high as 1.40 as we did previously.
With that, we think that this market is still continuing to be a very difficult market to deal with, and would more than likely be more in tune with the shorter-term trader. However, keep in mind that a break down below the 1.33 level is catastrophic, just as a move above 1.35 is very bullish. Until we get one of those, it’s probably more or less a difficult longer-term market.
European business already feeling chill of Ukraine crisis
Even before sanctions against Moscow start to bite, European companies doing business in Russia have been feeling the pinch and many fear worse to come, CEOs and analysts said Thursday.
Falling consumer confidence in Russia and a drop in the ruble have also dampened business for many European companies amid the months-old crisis.
"Of the major European countries, Germany is most exposed to the Russian risk," said Holger Schmieding, chief economist at Berenberg Bank.
Amid a mounting standoff with Russia over the Ukraine crisis, the EU opted this week for economic sanctions against Moscow.
The punitive measures coming into force Friday limit access for several Russian banks to Europe's financial markets and ban some exports, mainly in the defence and energy sectors.
But for many companies, business in the Russian market had already been suffering for months, said the VDMA German federation of machine-tool makers.
Russia is a major client for German electricity plants, gas turbines and agricultural machines.
Machine-tool exports to Russia dropped by over 17 percent in the first quarter, well ahead of sanctions, and overall German exports fell by 14 percent in the January-to-April period.
German machine-tool makers are set to miss their production growth target for this year, said the VDMA.
The sanctions now imposed on banks will potentially make it more difficult for Russian companies to access funds and invest in new machinery.
"The conflict with Russia doesn't affect only bilateral trade," warned VDMA chief economist Ralph Wiechers. "It hampers demand in many important markets for our industry."
- 'Heavily exposed' -
As many German companies released quarterly earnings this week, Jennifer McKeown of Capital Economics said that "while the (German) economy on aggregate is not at risk, particular companies are heavily exposed".
Sports goods maker Adidas, for one, warned Thursday that it will miss its financial targets for this year and next.
Among other factors, it blamed the weakness of the ruble and worsening consumer sentiment in Russia, one of its main markets with annual sales of one billion euros ($1.34 billion).
Its stock plunged more than 15 percent Thursday on the news.
German retail giant Metro, one of the main foreign employers in Russia, also expressed its "concern" over East-West tensions Thursday.
Oxford Economics said that while US and European sanctions "remain relatively narrow in scope" and their "their direct impact appears limited, their indirect impact may be substantial".
"Sanctions are likely to have a broad 'chilling' impact on Russia's access to external finance which will put pressure on the country's fragile balance of payments position. This in turn risks a weakening currency, higher interest rates and a negative impact on economic growth.
"GDP is now likely to shrink this year, with a further impact in 2015."
- 'Cost of uncertainty' -
Carmakers would be among the first to suffer under a Russian recession, especially makers of economy models such as Ford and Opel, predicted German auto sector expert Ferdinand Dudenhoeffer of the University of Duisburg-Essen.
Renault of France said this week it was unable to assess the possible impact of sanctions on its business.
Those likely to be directly hit by sanctions were even more reluctant to make any prediction.
French oil giant Total, which is currently building a new gas liquefaction site in Russia, deemed it "premature" to say anything about a possible effect, while energy company EON and Wintershall, a BASF subsidiary very involved in Russia, declined to comment.
At Siemens, which sells two billion euros worth of trains and gas turbines a year to Russian clients, company boss Joe Kaeser didn't see any major impact on this year's results, but would not be drawn on his outlook for 2015.
And energy giant BP, which teams up with Rosneft in Russia, this week expressed concerns about its business there and its financial results.
Marcel Fratzscher, head of Germany's DIW economic research institute, said that "the biggest cost factor (for European economies) is the uncertainty", rather than foregone business now.
At a time when the eurozone is still recovering from recession, he said, the uncertainty "could rapidly spread from specific sectors to the economy as a whole."
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Alarm Bells Ringing: Behind The Smoke And Mirrors Of The European Banking System
Alarm Bells Ringing - Behind the Smoke and Mirrors of the European Banking System
Alarm bells in the European banking system have been ringing for quite a while but nobody seems to be listening. The roaring capital markets are just too loud.
But we have been keeping track of a few things.
Private sector lending is dropping sharply in the Eurozone. The latest figures have just been released and the picture is not at all encouraging. Total private sector credit by Eurozone monetary financial institutions has accentuated its negative trajectory last June, with lending to households seeing the largest monthly decline since the height of the great financial crisis in late 2008. Uh-oh.
Periphery back in play? Very recently the second largest private bank in Portugal was caught in the bankruptcy of the Espirito Santo conglomerate, reporting the largest ever corporate loss in the country’s history just last Wednesday, and raising the specter that all might not be well in the Eurozone’s periphery. Now the Portuguese government may be forced to intervene, possibly using a very large chunk of the financial sector stabilization funds set aside during the country’s recent bailout.
BIS issues a(nother) warning. This should not be a surprise. In its 2014 annual report, released at the end of June, the Bank of International Settlements (“BIS”) warned that “banks that have failed to adjust post-crisis face lingering balance sheet weaknesses from direct exposure to overindebted borrowers and the drag of debt overhang on economic recovery”, with this situation being the most acute in Europe. It also stated that increases in government debt ratios in several cases appear to be on an unsustainable path. It appears that debt levels matter for (some) economists after all.
Bad loans rising. Before we had Fitch, the ratings agency, stating last May that in a sample of 124 Eurozone banks which participated in the latest stress test impaired loans increased by an average of 8% in 2013, with no less than 30 banks seeing an increase of 20%. This could have certainly contributed to the massive contraction in private sector credit that we are now seeing on its own. But there’s more.
Emerging dangers.Trillions more in fact. In February Reuters reported that European banks have loaned in excess of $3 trillion to emerging markets – a little less than the entire GDP of Germany, and more than four times the exposure of US lenders to those countries. Fitch chimed in saying that “a handful of large EU banks are materially exposed to more fragile emerging markets.” While direct risks might be manageable for these banks, any contagion might be another story. Is an Argentinean default truly contained? Are Turkey’s problems solved? What happens if the latest EU/US sanctions hit Russian banks or companies hard?
Where’s the capital? Another eye-opener came over a year ago. In April 2013, Jakob Vestergaard and María Retana at the Danish Institute for International Studies published "Smoke and Mirrors: On the Alleged Recapitalization of European Banks", a report partially funded by the World Bank. The title says it all. According to the authors, by using broad capital measures based on risk-weighted assets European banking regulators have overstated the banks’ soundness and resilience in their stress assessments. Accordingly, “recent increases in risk weighted capital ratios have been little more than a smokescreen.”
By focusing on leverage ratios instead, the authors reached some interesting conclusions. The least well-capitalized banking sector among the larger Eurozone countries is not the Spanish or Italian… but the German, closely followed by the French! According to their estimates, a five-fold increase in equity capital is needed in order to reach “adequate” levels of soundness. It is well worth reading the entire report, including the discussion on why regulators seem to be consistently behind the ball on bank recapitalization.
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EUR/USD Forecast August 4-8
EUR/USD had another negative week, surrendering to the greenback’s strength but recovering quite nicely at the end of the week. The highlight of the week is clearly the ECB decision. Will Draghi try to push the euro even lower? In addition, we have more PMIs and some German data. Here is an outlook on the highlights of this week and an updated technical analysis for EUR/USD.
Euro-zone inflation fell even deeper, to 0.4% in July and this weighs on the euro. On the other hand, unemployment is falling across the continent (11.5%) and consumption is on the rise, at least in core countries. In the US, the excellent GDP growth of 4% in Q2 (annualized) as well as higher expectations for monetary tightening (despite a not-too hawkish Fed statement) boosted the dollar across the board. The unimpressive NFP at +209K hurt the dollar, but it wasn’t a huge disaster. Will this free fall continue?
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a new week i wish to be successful week for everyone
Euro Near Eight-Month Low as Short Bets Surge
The euro was 0.4 percent from its lowest level versus the dollar since November as investors held the largest position in two years betting on a drop in the currency before the region’s central bank meets this week.
Europe’s common currency slid 3.2 percent in the past three months as the European Central Bank cut interest rates to spur inflation that slowed in July to the weakest in almost five years. Australia’s dollar rose a second day after retail sales climbed twice as fast as economists forecast. The greenback held gains versus developed-market peers before data tomorrow predicted to show growth in services accelerated. The Korean won and Malaysian ringgit strengthened.
“The trend in euro is clearly down, and we think that story’s got further to run,” said Imre Speizer, a markets strategist at Westpac Banking Corp. in Auckland. “Draghi will maintain his dovish tone for sure, given the inflation data across Europe has been mostly weak,” he said, referring to ECB President Mario Draghi.
The euro was little changed at $1.3424 as of 1:17 p.m. in Tokyo after touching $1.3367 on July 30, its lowest level since Nov. 12. It was steady at 137.78 yen. The yen changed hands at 102.64 per dollar after dropping 0.8 percent last week.
The ECB will probably keep policy rates unchanged on Aug. 7 as recent data hasn’t been of “sufficient magnitude (yet) to warrant an immediate policy response,” New York-based Royal Bank of Canada strategist Elsa Lignos wrote in a note to clients.
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Hi,
Thank you for the useful report.