Eur/usd - page 227
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Eurozone Construction Production Falls For Second Month
Eurozone construction output declined for the second straight month in December, at a faster pace, figures from Eurostat showed Wednesday.
Production in construction fell 0.8 percent month-on-month in December, following a 0.5 percent drop in November, which was revised from a 0.1 percemt decrease. In October, production had risen 1.0 percent.
Output in the building sector dropped 1.0 percent monthly in December, while civil engineering activity logged an increase of 1.7 percent.
Year-on-year, construction output plunged 3.5 percent at the end of the year, in contrast to a 0.5 percent growth in the previous month, which was revised downwardly from a 2.2 percent rise. It was the first decline in three months.
In the EU28, construction output also fell for the second straight month in December by 0.5 percent, the same rate as seen in the preceding month, revised from a fall of 0.2 percent.
Annually, production in construction slid 0.5 percent during the month, reversing a revised 1.3 percent gain in November.
In the whole year 2014, total construction output grew 2.0 percent in the euro area and 3.0 percent in the EU28.
Among EU states, Hungary, Czech Republic and Germany logged the worst monthly decrease in construction output, while Romania, Italy and Poland registered the biggest increases.
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On the 4 hour chart the price keep dropping from a certain point which cannot break on 16th of February price rose after a potential hammer and yesterday price fell after a strong doji. the pair is forced the to trade in sideways until a strong signal can decide the upcoming trend.
Annual Inflation in France Turns Negative in January
Consumer price growth in France decelerated in the first month of 2015 on a yearly basis, amid an economically challenging time for the country, mainly due to weak economic growth and weak consumer demand.
Inflation in the euro zone's second largest economy came in at a negative 0.4% in January, after running at a 0.1% pace in December, the National Institute of Statistics and Economic Studies (INSEE) reported on Thursday. Market analysts had expected a 0.3% reduction. The gauge dropped to deflation territory for the first time since October 2009
On a monthly basis, French CPI saw a 1.0% reduction in price growth in the reported month, after showing a 0.1% rise in prices in the previous month. Analysts had forecast a 1.0% price decline for the reported period.
Inflation outlook
"Falling energy prices are projected to further reduce inflation to zero in 2015," the European Commission (EC) predicts in its 2015 Winter Economic Forecast, published in January.
"Prices are then set to accelerate moderately and reach 1.0% in 2016, as the output gap starts to dwindle and inflationary pressures generated by the euro depreciation and the ECB's new monetary policy are felt," the EC said.
CPI measures the movement of the overall price level (cost of living). The measurement is based on a sample of goods and services paid for by the population, and is not seasonally adjusted.
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Euro zone Current Account Tightens in December
The euro zone's current account recorded a surplus of €17.8 billion in December, on a seasonally adjusted basis, compared with €19.9 billion in the previous month, according to Thursday's report by the European Central Bank (ECB).
On a non-seasonally adjusted basis, meanwhile, the measure indicating the net flow of current transactions, including goods, services and interest payments into and out of the currency bloc, widened to €29.2 billion, compared with a revised €26.5 billion reported in the previous month.
A positive current account balance indicates that the entity is a net lender to the rest of the world, while a negative current account balance indicates that it is a net borrower from the rest of the world.
Greece in the spotlight
Later today Greek Prime Minster Alexis Tsipras's government will submit a request to Eurogroup Chair Jeroen Dijsselbloem for an extension to its loan agreement, while resisting the continuation of its current bailout program.
On Wednesday, ECB policy makers set Emergency Liquidity Assistance (ELA) for Greek lenders at 68.3 billion euros, up from 65 billion euros.
Should no deal be in place by February 28, when Greece was supposed to conclude a review of its bailout with the Europeans, Greek banks would remain without access to affordable funding, thus facing the threat of insolvency.
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EURUSD initially fell during yesterday session, but found enough buying pressure at the 10-day moving average to turn things back around and close near the high of the day. The pair continues to consolidate in a very choppy environment waiting for Athens to agree in a bailout deal.
First ECB Minutes Reveal Thinking Behind January QE
The European Central Bank on Thursday released the minutes of its monetary policy meetings for the first time that revealed how the deliberations went that led to the approval of the EUR 1.1 trillion quantitative easing in the January session.
"A large majority of voting members" supported the decision to announce the EUR 1.1 trillion scheme that included buying government bonds, the bank said in the minutes of the January 22 rate-setting session.
Further, members also broadly agreed that purchases of sovereign debt appeared to be the only instrument of sufficient scope to provide the necessary monetary stimulus to deliver on the ECB's price stability objective.
"Members broadly shared the assessment that inflation dynamics had continued to be weaker than expected, economic slack had remained sizable and money and credit developments had continued to be subdued, notwithstanding recent more positive monetary developments," the minutes said.
"The Governing Council was thus faced with heightened risks of too prolonged a period of too low inflation."
Eurozone consumer prices declined for the second straight month in January largely due to lower energy prices, posting the biggest annual fall since 2009. Falling prices complicates ECB's aim to keep inflation 'below, but close to 2 percent'.
While all members considered asset purchases, including sovereign bond purchases, among available policy options, some members argued that this instrument should only be used in contingency situations, the ECB minutes said.
They also agreed that the existing monetary policy measures adopted in June and September last year would fall short in quantitative terms. Members also broadly shared the view that the conditions were fully in place for taking additional monetary policy action at the January meeting.
Some policymakers were of the view that corporate bond purchases were 'the most natural extension' of existing stimulus measures. However, it was concluded that their potential to boost inflation was small. Members also said that this asset class must be considered in future, if needed.
The bank had said earlier that the summary of discussions would be in 'an unattributed form', which meant no individual members will be named.
Germany had voiced strong opposition to the move to purchase bond purchases in the run up to the January meeting and continue to do so.
By remaining silent on the voting pattern within the policy-making body, the bank risks drawing criticism of lack of transparency. That said, the Governing Council takes most decisions by consensus rather than votes.
Since the ECB sets the policy for a group of countries, the move would serve to shield individual policymakers from possible political pressure, thereby safeguarding the sanctity of central bank independence.
The ECB's rate-setting body led by President Mario Draghi consists of six members of the ECB's Executive Board and the national central bank governors of the 19 euro area countries.
Policymakers also considered the possible moral hazard implications for Eurozone governments due to the ECB's decision to buy government bonds, the minutes said. They concluded that the effectiveness of the measure was dependent on the appropriate action such as growth-friendly fiscal policies and structural reforms.
Regarding the risk-sharing with national central banks, or NCBs, a kind of first for the ECB, some members raised the issue of perceptions of a lack of unity and sought full risk-sharing. Meanwhile, some argued for the same to underline the singleness of monetary policy.
The view in favor of risk-sharing was that it "would be more commensurate with the current architecture of Economic and Monetary Union", the minutes said.
Under the QE plan, purchases of sovereign debt will be 12 percent of the total purchases and these will be purchased by NCBs and will be subject to loss sharing. The rest of the debt purchased by NCBs will not be subject to loss sharing. The ECB will hold 8 percent of the asset purchases. Hence, 20 percent of the additional asset purchases will be open for risk sharing.
On the size of the QE, ECB Executive Board member and Chief Economist Peter Praet had suggested EUR 50 billion of monthly purchases, which was also in line with market expectations. However, there was broad support to exceed that to accelerate the impact of the measure. Consequently, it was decided to buy EUR 60 billion debt starting March and to last until September 2016.
"Members agreed to make the termination of purchases contingent on the evolving path of inflation being consistent with the Governing Council's price stability objective. This provided an important element of forward guidance," the minutes said.
In December last year, the ECB had announced its decision publish the minutes, which it calls 'accounts' of Governing Council monetary policy discussions, starting with the meeting on January 22. The accounts will be released four weeks after each meeting.
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Deflation Unstoppable: Januaary German PPI
Annual producer prices in the euro area's number one economy continued to decline, falling for an 18th consecutive month in January, according to the latest report from the Federal Statistical Office (Destatis). On a monthly basis, the gauge dropped as well.
The headline annual Producer Price Index (PPI) in Germany declined 2.2% in the reported month, extending the decrease of 1.7% posted in the previous month. Market consensus had bet on a 2.0% drop.
On a monthly basis, the gauge edged 0.6% lower in January, while it had fallen 0.7% in the preceding month. Analysts had predicted a 0.4% decline.
The index measures the average change in the price of goods and services sold by manufacturers and producers in the wholesale market during a given period.
Deflation hits consumer prices
Consumer price growth in the euro area's number one economy turned negative in January, for the first time since September 2009, according to the latest report from Destatis released on February 12.
The cost of living in Germany, measured by the Consumer Price Index (CPI), dropped 0.4% in January compared to the same period a year ago.
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French Manufacturing Declines in February
The manufacturing sector in France took a step back in February, Markit Economics showed on Friday, in a reading that came in far short of the preliminary print.
The flash manufacturing PMI in France came in at 47.7 in the second month of the year, slipping from the final 49.2 seen in January. Analysts had been more optimistic, expecting a 49.6 reading.
The indicator is a key gauge of overall economic health because businesses have to respond quickly to changing market conditions. The French manufacturing sector has now been in contraction territory, below the 50-mark, since May last year.
Services PMI
Meanwhile, business activity in France's services sector recovered in February, according to a closely watched preliminary survey.
The flash services PMI shot up to 53.4 in the reported month, from the 49.4 seen in the first month of the year. Analysts had expected a 49.9 result.
The services PMI is based on a survey of selected companies and provides an advance indicator for the private sector in the economy by tracking changes in variables such as output, new orders, stock levels, employment and prices.
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German PMIs come in mixed
Markit was expected to report an advance in manufacturing PMI to 51.8 points in February, from 50.9 in the final read for January. For the services sector, an advance from 54 to 54.3 was predicted.
Euro/dollar was trading on the back foot due to worries about Greece, around 1.1327.
French PMIs were mixed, with a fall in manufacturing but a leap in services.
Greece is currently left, right and center.
Euro Continues Lower After Euro Zone PMI
The euro remained weaker against the US dollar on Friday, with market participants digesting the latest flash PMI survey data from Germany and France, and for the euro area as a whole.
The euro was seen 0.36% down at $1.1325 versus the greenback, after having hit an intraday low of $1.1316 earlier in the session.
Moreover, the outcome from the Eurogroup meeting is eagerly awaited later on today, with expectations that an extension of Greece's loan will be confirmed, which should contribute positively to the euro currency. Failure to reach an agreement will likely see the euro come under increased selling pressure.
Flash PMIs
For Germany, both factory and services PMIs stayed in expansion in February, posting 50.9 points and 55.5 points, respectively.
France PMIs showed mixed results in February, with flash manufacturing PMI dropping to 47.7 points and the services reading jumping to 53.4, after 49.2 and 49.4, respectively, booked in January.
In the euro zone as a whole, the flash manufacturing PMI hit 51.1 points in February after 51 points a month ago, Markit said, compared to analysts' estimates of 51.5 points. The gauge for the services sector edged up to 53.9 points in the measured month, from 52.7 points in January, while a 53 points had been expected.
Technical Analysis
EUR/USD is moving sideways on intraday charts, as it reached a multi week low at $1.109. The currency cross established a trading range between $1.15 and $1.11, which on a daily timeframe looks like a so-called downtrend continuation pattern "bearish flag formation".
On an intraday basis the range is even thinner, and the playground is outlined by resistance at $1.1470 and support of $1.13.
Any trading, as long as the cross remains in the pattern, should be avoided. In the short term we are more likely bullish, since if prices break above $1.15, a spike toward $1.17 will likely be seen.
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