Eur/usd - page 146
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The break was expected
German Ifo business climate falls to 13-month low of 109.7 in August
German business confidence deteriorated to the lowest level in more than a year in August, dampening optimism over the health of the euro zone’s largest economy, industry data showed on Monday.
In a report, the German research institute, Ifo said its Business Climate Index fell to a seasonally adjusted 106.3 this month, below forecasts for 107.0 and down from a reading of 108.0 in July.
The Current Assessment Index declined to 111.1 in August, disappointing expectations for a reading of 112.0 and down from 112.9 in July.
The Business Expectations Index, which measures attitudes toward business prospects over the next six months, dropped to 101.7 this month from 103.4 in July, missing forecasts for 102.0.
The monthly index is based on a survey of around 7,000 German firms in the manufacturing, construction, wholesale and retail sectors.
Following the release of the data, the euro held on to losses against the U.S. dollar, with EUR/USD shedding 0.39% to trade at 1.3189, compared to 1.3191 ahead of the data.
Meanwhile, European stock markets were mostly higher. Germany's DAX rallied 1.1%, the DJ Euro Stoxx 50 rose 1%, France’s CAC 40 picked up 1%, while London’s FTSE 100 dipped 0.1%.
EURUSD decline continues making new fresh lows on Friday at 1.3220 with no buyers in sight. The down trend continues intact for now but with a high risk of a short squeeze as stochastic is showing oversold conditions, the next support zone is within 1.3106 and 1.3174 reporting to September 2013 low.
Euro zone bond yields dive as Draghi comments feed QE speculation
Yields on most euro zone government bonds fell to record lows on Monday as speculation grew that the European Central Bank was preparing a programme of asset purchases to counter wilting inflation.
Germany, France, Italy, Spain, Portugal, Ireland and others saw their yields drop to all-time lows. Greek yields also fell but remained above this year's troughs; a senior source told Reuters that Athens planned to sell debt soon.
In stronger language than he has used in the past, European Central Bank President Mario Draghi said on Friday at an annual meeting of central bankers in Jackson Hole, Wyoming, that the ECB was prepared to respond with all its "available" tools should inflation drop further.
He said governments could do more to boost demand and pointed out how inflation expectations had dropped over the past month. That increased speculation the ECB will embark on a large-scale asset-buying scheme known as quantitative easing, or QE, to revive inflation.
"The market seems to be attaching a higher probability that the ECB will do QE, and rightly so," said Jussi Hiljanen, chief fixed income strategist at SEB. "Inflation expectations have been dropping like a stone and this is causing increasing concern for the ECB."
German 10-year yields hit a record low of 0.926 percent, before puling back to 0.95 percent. The moves may have been exacerbated by thin volumes on a bank holiday in London and might partly reverse on Tuesday, analysts said.
Euro zone consumer prices grew only 0.4 percent in July and are expected to post 0.3 percent growth in August on Friday, a far cry from the ECB's target of just below 2 percent.
The five-year, five-year forward breakeven rate - the ECB's preferred measure of the inflation outlook, which measures roughly where investors see five-year inflation rates in five years, dropped almost 20 basis points in August alone, to last trade at 1.96 percent. Traders say it is close to its 2010 record lows of around 1.90 percent.
Other measures of inflation expectations have also fallen. Ten-year inflation swaps trade at 1.44 percent, while two-year breakeven rates are negative.
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German Business Sentiment Weakens For Fourth Month
German business sentiment weakened for the fourth consecutive month to the lowest level in a year in August, as the escalating crisis in Ukraine and the resultant sanctions against Russia pose downside risks to the economic activity.
The Ifo business climate index fell to 106.3 in August, the lowest since July 2013, from 108 a month ago, a monthly survey conducted by the Ifo institute among 7,000 firms showed Monday. The indicator was forecast to drop to 107 in August.
The firms were less satisfied with their current business situation and skeptical about their future course of business as the economy continues to lose steam, the Munich-based institute said.
The current situation index dropped to 111.1 from 112.9 in July. The expected score for August was 112. Similarly, the economic expectations index came in at 101.7 in August, down from 103.4 in July. The index was expected to fall to 102.
Confidence in manufacturing declined to the lowest since July 2013. The current business situation was assessed less favorably for the third consecutive month and the outlook for the coming months deteriorated noticeably.
In wholesaling, confidence hit its weakest point in a year. Wholesalers were significantly less satisfied with their current business situation and the majority of expectations are slightly pessimistic for the first time since July 2013.
In retailing as well, the business climate deteriorated significantly in August. The assessments of the current situation took a clear turn for the worse. Future business developments were again assessed somewhat more skeptically, the Ifo said.
On the other hand, confidence in the construction sector rose slightly in August. The construction companies were slightly more satisfied with their current situation than in July. In addition, they are slightly more optimistic regarding the business outlook.
Business confidence in the service sector dropped to 20.1 from 22.4 in July. Although the assessments of the current situation have improved significantly, the expectations for the next six months have clouded over noticeably.
Low interest rates, low home ownership ratios and high saving ratios have all supported the German real estate markets during the last years, ING Bank NV economist Carsten Brzeski, said.
None of these factors is likely to reverse quickly in the near term, he said. Combined with higher wages, private consumption should remain an important driver of growth in the third quarter and beyond.
Bundesbank last week said sanctions against Russia, and counter actions taken by it, would affect German exports. Crisis in Ukraine as well as conflict in the Middle East weakened Germany's growth prospects so far this year.
Official data earlier this month showed that the largest Eurozone economy contracted 0.2 percent in the second quarter on weaker exports and investment.
source
we have a strong data today on the USD lets see if this will trigger the reversal
Draghi calls for fiscal help, hears busy signal: James Saft
It may well be a big deal that Mario Draghi is now talking fiscal stimulus, but the unlikeliness of this happening only underscores that he'll be forced to do more with monetary policy.
The European Central Bank president delivered a ground-breaking speech at Jackson Hole, calling for government spending to do more of the heavy lifting of bringing idled workers back on the job while acknowledging that, his previous excuses aside, market prices show he is losing the battle against falling inflation.
All of this is refreshing, and would be highly encouraging but for some pesky realities.
Euro zone countries are not likely, any time soon, to engage in any meaningful stimulus through government spending.
And monetary policy faces pretty severe mathematical, structural and cultural constraints. Zero is a barrier that is pretty hard to get below, and quantitative-easing-style maneuvers face their own issues. Not only is there only a small market for asset-backed bonds, which the ECB is likely to eventually start buying up, but there is a taboo, made flesh in law, on the central bank providing direct financing to member governments.
One thing Draghi did achieve, and should be able to sustain, was weakening the euro, which fell to near one-year lows against the dollar. Currency trading being a game about relative strength, Draghi's comments, even if not backed with as much action as they would seem to warrant, show that policy will be more accommodative in the euro zone than in the U.S.
Draghi is both blessed and cursed by being perhaps the only major figure in the euro zone drama who can act both quickly and with some force. That was clearly shown with his electrifying "whatever it takes" comments in 2012, when he more or less single-handedly backstopped the euro project against disaster.
But though he has more scope for action than, say, French President Francois Hollande, who is currently trying to reconstitute his government, he faces very real limitations when we come round to defining 'it'.
The market view, in the wake of the speech, was that this brings us closer to outright QE in the euro zone. This is probably correct, but possibly slightly beside the point.
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The EURUSD gapped lower yesterday, as the bearish pressure on the Euro continues. Breaking below 1.3185 and making new lows but is showing some signs of exhaustion and today we may see some recovery.
Hopefully at the very least it will recover the gap before it continues falling.