Eur/usd - page 165
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EUR/USD Forecast Sep. 29 – Oct. 3
EUR/USD continued deteriorating and broke down to the lowest levels since November 2012. Is it getting close to the bottom or can we expect more falls? The keys are in the hand of Mario Draghi. Apart from the ECB meeting, we have inflation numbers as well as PMIs and other events . Here is an outlook on the highlights of this week and an updated technical analysis for EUR/USD.
Also another German survey showed worse than expected business confidence. Preliminary PMIs were mixed but certainly unimpressive and Draghi joined in by reiterating that the ECB is ready to do more. Yet a big part of the move came from the other side of the Atlantic, as the US dollar continued forward, beating all its major peers. It was boosted by the highest new home sales in 6 years, as well as the expected upgrade to GDP. How will the pair fare in the new quarter?
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EURUSD fell during the course of the day on the last Friday session, breaking the bottom of the hammer created last week. This is a very negative sign and therefore the market should continue to go much lower. The next target is probably the 1.25 level but the longer-term charts suggest that we could go even lower.
Draghi Devaluing Euro Cheers ECB as Inflation Seen Fading
Mario Draghi’s strategy for reviving the euro area looks like devaluation.
While the European Central Bank president says the exchange rate isn’t a policy target, officials aren’t secretive about their approval of the currency’s 9 percent slide. The depreciation increases the cost of imports and boosts exporters’ competitiveness, aiding the effort to revive inflation that data tomorrow will probably show is at the weakest since 2009.
The euro dropped from a 2 1/2-year high in May as officials unveiled a medley of stimulus measures. It consolidated below $1.30 when Draghi cut rates this month and signaled a willingness to grow the ECB’s balance sheet by as much 1 trillion euros ($1.3 trillion). Details of a plan to buy assets will probably come this week after the Governing Council meets in Naples, Italy.
“When Draghi mentioned expanding the size of the balance sheet, I think he was secretly thinking of the exchange rate,” said Martin Van Vliet, senior euro-area economist at ING Groep NV in Amsterdam. “I’m sure he’s happy to see that the euro has been going down. He’s well aware that one important channel of policy transmission is the exchange rate.”
Since the last meeting, Governing Council members have joined a chorus of officials highlighting the role of the euro, while Draghi said the devaluation reflects a divergence between Federal Reserve and ECB policy. Such remarks evoke language used in competitive devaluations, where nations try to boost exports by driving their currencies down.
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Euro zone consumer confidence -11.0 vs. -11.0 forecast
Consumer confidence within the euro zone fell last month, industry data showed on Monday.
In a report, European Commission said that Euro zone consumer confidence fell to an annual rate of -11.0, from -10.0 in the preceding month.
Analysts had expected Euro zone consumer confidence to fall -11.0 last month.
thank you for the information
The dollar continues to climb free.
The DXY index rises 11 consecutive weeks, the first time there since 1971, the year in which the exchange rates fluctuated.
The DXY index rose 1.35% last week, the third highest rise in a series of 11 weeks, which shows no signs of slowing down any.
The USD rose against all currencies.
Tough job ahead for the ECB in Europe’s week ahead
Inflation remains stubbornly low, unemployment is stubbornly high and powerhouse Germany is showing signs of heading into stagnation. In other words, the eurozone economy is still struggling. That’s why all eyes will be on Mario Draghi this week, to see whether the European Central Bank has anything up its sleeve to rescue the currency union.
With every lackluster bit of data that arrives, pressure builds on the central bank to launch a full-scale quantitative-easing program. But few economists expect ECB President Draghi to pull out the “big bazooka” just yet.
Instead, the ECB at its meeting on Thursday will unveil more details of its “private” QE program, most analysts believe. That upcoming program — which entails purchases of asset-backed securities and covered bonds — was announced at the bank’s last get-together, in September.
The new measures, coupled with a targeted long-term refinancing operation, are expected to move the ECB’s balance sheet “towards the dimensions it used to have at the beginning of 2012,” Draghi has said.
In early 2012, the balance sheet topped 3 trillion euros ($3.8 trillion); that compares with around €2 trillion earlier in September. Read: ECB to unveil details of plan to save eurozone
In the first round of TLTRO, eurozone banks borrowed “only” €82.6 billion, seen by market participants as a disappointment and as pushing the ECB closer toward full-fledged QE.
“Draghi has commented that this allotment was well within the ECB’s expectations and that the December auction was needed before assessing the success of the program. We expect him to repeat this message at the meeting,” analysts at Danske Bank said in a note.
ECB October meeting: No rate cuts are expected on Thursday, after the ECB took its refinancing rate down to 0.05% at its last meeting. At the same time, it pulled its deposit rate further into negative territory, to negative 0.2% — a level Draghi described as “the lower bound.”
The ECB rate decision is due at 12:45 p.m. London time, or 7:45 a.m. Eastern Time, followed by Draghi’s monthly news conference 45 minutes later.
Eurozone inflation data: The preliminary reading on September inflation for the euro area is due Tuesday at 10 a.m. London time, or 5 a.m. Eastern Time. Some economists expect consumer prices to have grown only 0.3%, which would be the slowest rate of inflation in five years. Inflation stood at 0.4% in August.
Eurozone unemployment data: Due at the same time as inflation data on Tuesday. The joblessness rate was stable at 11.5% in July, and no change is forecast for August.
U.K. PMIs: A trifecta of purchasing managers’ indexes for the U.K. — construction, manufacturing and services — will give an update on how its economy performed at the end of the third quarter. The manufacturing PMI fell to a 14-month low in August, so investors will be eager to see if the sector picked up again in September. The manufacturing reading is due on Wednesday, the construction PMI out on Thursday and the services PMI on Friday. All releases come out at 9:30 a.m. London time.
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Eurozone Economic Confidence Falls To 10-Month Low
Eurozone economic confidence weakened to a 10-month low in September as consumers and retailers turned more cautious suggesting that the region hardly recovered from a flat performance in the second quarter.
The economic sentiment index dropped to 99.9, in line with forecast, from 100.6 in August, survey results from the European Commission showed Monday. The index fell below its long-term average of 100 for the first time since last November.
While confidence among consumers and retailers deteriorated, sentiment in services and construction improved marginally in September.
Consumer confidence booked the fourth month-on-month decline in a row propelled by consumers' increased pessimism about future unemployment, the future general economic situation and the level of future savings. Matching the flash estimate, the corresponding index declined to -11.4 from -10 in the prior month.
The retail trade confidence index fell to -7.2 from -4.6 in August. The sharp drop was mainly due to more negative assessments of all components of the indicator, namely the expected and present business situation and the adequacy of the volume of stocks.
The industry confidence indicator dipped less-than-expected, by 0.2 points to -5.5 points September. The score was seen at -5.8. The slight decline reflects managers' improved production expectations being counter-balanced by grimmer views on the stocks of finished products and the current level of overall order books.
Meanwhile, construction confidence brightened as a consequence of significantly improved assessments of the level of order books in combination with broadly unchanged employment expectations. The indicator for construction rose to -27.7 from -28.4 in August.
The sentiment indicator for services rose marginally to 3.2 from 3.1 a month ago. The broadly unchanged reading of services confidence was due to improved demand expectations being outweighed by managers' more negative stance on past demand and unchanged appraisals of the past business situation.
The Eurozone ESI now points to annual GDP growth slowing to just 0.5 percent from 0.7 percent in the second quarter and further falls could easily leave it back in recession territory, Jennifer McKeown, a senior European economist at Capital Economics said. This clearly supports the case for more fiscal and monetary policy support.
But IHS Global Insight economist Howard Archer expects the European Central Bank to sit tight for an extended period, while its June and September measures kick in and hopefully increasingly take effect.
Archer said he suspects that there is still appreciable reluctance within the ECB's Governing Council to engage in full blown quantitative easing in the form of printing money to buy government bonds, so it will only occur if the Eurozone returns to recession and consumer price inflation hits a series of new lows.
Another survey showed that business confidence weakened in September. The corresponding index fell to 0.07 in September from 0.16 in August and well below expectations of 0.12 points.
Managers' evaluation of the level of past production, export order books and the stocks of finished products, as well as overall order books deteriorated. By contrast, production expectations brightened somewhat.
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German Retail Sales 2.5% vs. 0.5% forecast
Retail sales in Germany rose more-than-expected last month, official data showed on Tuesday.
In a report, Destatis said that German Retail Sales rose to a seasonally adjusted 2.5%, from -1.1% in the preceding month whose figure was revised up from -1.4%.
Analysts had expected German Retail Sales to rise 0.5% last month.
EURUSD tried to rally during the course of the day on yesterday session, but failed near the 1.27 level. This level ended up pushing market back down and forming a doji, which of course represents indecision in the market. The EURUSD is likely to take a pause, but a break below yesterday low could push the pair towards the 1.25 level given enough time.