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Germany's Economic Growth To Continue In Near-Term: Conference Board
Germany's leading index increased for the fourth successive month in January, suggesting that the current expansion in economic activity will continue in the near term, survey data published by the Conference Board revealed Friday.
The leading economic index advanced 0.2 percent sequentially to 128.3 in January, after growing 0.9 percent in December and 0.3 percent in November.
All the seven components the constitute the leading index increased in January, with the biggest contributions coming from the yield spread, investment goods and new orders.
Conference board further noted that the coincident economic index, which measures the current situation, moved up 0.2 percent month-on-month to 123.7 in January. This followed increases of 0.1 percent and 0.2 percent respectively in December and November.
During the six months ended January, the leading index logged a 2.3 percent expansion, and the coincident index recorded a 0.8 percent rise.
source
EUR/USD Forecast March 24, 2014, Technical Analysis
The EUR/USD pair rose slightly during the session on Friday, but essentially sat still. We are right at the 1.38 handle, an area that has been supportive in the past. However, we do not have a set up at the moment that suggests we should buy or sell. Nonetheless though, we feel that the market should make a significant decision soon, but we believe that the next couple of sessions could be a bit choppy as we try to decide which direction the markets going to go longer term. With that being the case, we are on the sidelines.
EUR/USD Forecast March 24-28
EUR/USD was not able to conquer 1.40 and was eventually hit hard. Is this a temporary dip or a change of courseFlash manufacturing and services PMIs, German Ifo Business Climate and inflation data are the main market-movers this week. Here is an outlook on the main events ahead.
The disappointing ZEW economic sentiment from Germany only had a temporary effect, and it seemed that the euro could still move higher. But later came Janet Yellen: the Fed tapered bond buys once again and Yellen also released a comment about raising rates. The resulting dollar strength sent EUR/USD below uptrend support. The Russia – Ukraine crisis is humming in the background.
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EU Banking Pact Version 2.0: EU’s Latest Nail In Its Own Coffin
The New Agreement Still Isn’t Good Enough, Same Obstacles, Same Inadequate Results. Conclusions On How To Protect Yourself And Profit
In late December 2013 EU member states agreed on an EU banking union plan. It was widely criticized as too slow implement and too underfunded to provide a credible guarantee of EU banking stability in case of bank failures. It also left individual member states without any outside aid for many years to come.
Late Thursday March 20th the European parliament and EU member states finally settled terms on the unified system for handling bank failures and potential banking crises that partially addressed the faults of the original version of the member states.
The final EU Parliament approved version is still too slow and underfunded to consider the EU banking system as stable as that of the US or Japan. It remains a ticking time bomb under the EZ and EUR, only now it’s a smaller bomb, and one that may be easier to disarm if times of potential bank crises.
Changes From The Original Agreement
We covered the terms of the original single resolution mechanism (SRM) here back in December.
Here are the changes from the original agreement of the EU finance ministers of December 2013.
The EU parliament wanted and got:
More and faster mutualization, i.e. aid from wealthier nations to bail out banks in poorer member states.
a) The new deal accelerates the build-up of a common bank-paid fund from 10 to 8 years.
b) It also makes the common funds available sooner. Under this provisional deal, 40% of the donations are mutualized after first year and 60% after the second. The original deal limited the growth in the percent of funds available to all to the percentage growth of the fund. Ten percent of the final 55 bln EUR fund was to be contributed each year, therefore after the first year only 10% of that amount was available to all members, 20% after the second year, and so on.
More centralization (more real power to close banks and disburse common EU funds) in the central EU bank regulator rather than committees of member states. In the original deal, a resolution board comprised of EZ member representatives would make the proposals for dealing with the problem bank, and the central EU commission would only have a veto power, which could be overruled by a majority vote of banking union member states. Now, the Commission is given a formal role to approve resolution decisions recommended by an independent board. Finance ministers would be able to overturn the decision, but only in limited cases.
Flaws: Why The New SRM Is Still A Time Bomb Under The EZ and EUR
Although some of the same fatal flaws of the original deal have been partly remedied, the deal remains fatally flawed. For example:
–The new deal purports to have cut enough procedural hurdles to enable wind-up decisions to be taken swiftly over a weekend before markets open and prevent market panic situations. However the decision making process still involves over 100 separate voting decision-makers on multiple panels. It’s theoretically possible, but getting all that done so quickly, on a weekend, will be, ahem, a challenge. Remember that these meetings also require an army of support staff and translators too.
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EUR/USD weekly outlook: March 24 - 28
The euro edged higher against the dollar on Friday, as the dollar took a breather following a rally in the previous two sessions, sparked by prospects for an earlier than anticipated rate hike by the Federal Reserve.
EUR/USD edged up 0.12% to 1.3793 on Friday, after falling to two-week lows of 1.3748 on Thursday. For the week, the pair lost 0.94%.
The pair is likely to find support at 1.3748, Thursday’s low and resistance at 1.3844, Thursday’s high.
The single currency was boosted after data on Friday showed that the region’s current account surplus rose to a record €25.3 billion in January.
A separate report showed that euro zone consumer confidence improved more than expected in March.
The European Commission reported that its sentiment index rose to -9.3 from a reading of -12.7 in February. Analysts had expected the index to tick up to -12.4.
Demand for the dollar continued to be underpinned by speculation that the U.S. central bank could raise rates as soon as early next year.
The dollar rallied on Wednesday after Fed Chair Janet Yellen indicated that the bank could begin to raise interest rates about six months after its bond-buying program winds up, which is expected to happen this fall.
The comments prompted investors to bring forward expectations for a rate hike to as early as March of next year.
The Fed also reduced its monthly bond purchases by an additional $10 billion to $55 billion at the conclusion of its two-day policy meeting, and said there was “underlying strength in the broader economy.”
In the coming week, investors will be looking ahead to U.S. data from the housing sector, as well as reports on consumer confidence and durable goods. Euro zone data on private sector activity and preliminary inflation data from Germany will also be in focus.
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Flash France Composite Output Index rises to 31-month high
Key points:
Flash France Composite Output Index(1) rises to 51.6 (47.9 in February), 31-month high
Flash France Services Activity Index(2) climbs to 51.4 (47.2 in February), 26-month high
Flash France Manufacturing Output Index(3) rises to 52.8 (50.8 in February), 34-month high
Flash France Manufacturing PMI(4) climbs to 51.9 (49.7 in February), 33-month high
Data collected 12-21 March
Summary:
French private sector output returned to growth in March. Although moderate, the rate of expansion was the sharpest in 31 months. This was indicated by the Markit Flash France Composite Output Index, based on around 85% of normal monthly survey replies, posting 51.6, up from 47.9 in February. That was the first reading above the 50.0 no-change threshold since last October.
Expansion was broad-based across the service and manufacturing sectors. Services activity increased for the first time in five months during March. Growth was at a 26-month high, albeit modest overall. Manufacturers reported a solid rise in output that was the sharpest since May 2011.
Underpinning activity growth was a rise in the level of new orders received by French private sector companies during March. This ended a five-month period of contraction. In the manufacturing sector, growth of new work picked up to a solid pace that was the sharpest in 34 months (partly boosted by a faster rise in new export orders). Service providers signalled a marginal increase in new business, following five successive monthly falls. Panellists commented on improved demand conditions and successful marketing initiatives.
full report
German PMIs disappoint – EUR/USD erases early gains
German PMIs were expected to remain at the same range but they dropped.
EUR/USD moved higher on the release of the French data, crossing the 1.38 line, but dropped on the German short coming.
French PMIs came out better than expected and both moved to positive territory: the flash services PMI rose from 47.2 to 51.4 points, above 47.9 expected. The manufacturing figure rose from 49.7 to 51.9, also beating the modest expectations of 49.8 points.
source
Euro Factory, Services Growth Stays Near Highest Since 2011
Growth in euro-area manufacturing and services stayed close to the fastest since 2011 in March as France improved, providing further evidence that the region’s recovery is on track.
Indexes for both industries based on surveys of purchasing managers were little changed from February, London-based Markit Economics Ltd. said in a statement today. A composite gauge slipped to 53.2 from 53.3 in February, matching the median forecast in a Bloomberg News survey of 26 economists. The index has been above 50, indicating expansion, since July.
The report follows European Central Bank Mario Draghi’s prediction that a fledgling recovery from the sovereign debt crisis will gradually gain strength. Risks to that scenario include the euro’s 6.2 percent increase against the dollar in the past year and signs of slowing growth in China.
“The ongoing upturn in business activity in March rounds off the euro zone’s best quarter since the second quarter of 2011,” Chris Williamson, chief economist at Markit, said in a statement.
In China today, another survey showed manufacturing weakened for a fifth straight month, deepening concern the nation will miss its 7.5 percent growth target this year. The Purchasing Managers’ Index from HSBC Holdings Plc and Markit dropped to 48.1, compared with the 48.7 median estimate of 22 analysts surveyed by Bloomberg and February’s final 48.5 figure.
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China data hits Europe shares
European shares fell on Monday after data showed Chinese manufacturing contracted in the first quarter, raising worries over global growth.
Geopolitical concerns jangled nerves as U.S. President Barack Obama began talks with his European allies on their response to the Crimea crisis.
The euro gained against the dollar and German Bund futures extended losses after the flash composite purchasing managers' index for France jumped to 51.6 in March from 47.9 last month. But the currency gave up its gains after figures showed growth slowed in Germany. Data from the euro zone as a whole dipped compared with February.
By late morning, the FTSEurofirst 300 index .FTEU3, which rose 1.8 percent last week, was down 0.4 percent.
The flash Markit/HSBC China Purchasing Manager index fell to an eight-month low of 48.1 in March from February's 48.5. The index has been below 50 since January. A score over 50 indicates expansion; anything under, contraction.
"China's slowdown is sharper than what most people had expected, which fuels worries about the impact on global growth," said Philippe de Vandiere, an analyst at Altedia Investment Consulting in Paris.
"But Chinese authorities have plenty of tools to avoid a hard landing, and we know that the country's transition to an economic model more focused on consumer spending will lower its growth rate a bit, so no big concern here."
A string of weak numbers has reinforced concern over a slowdown in the world's second-largest economy. The impact on Asian shares was limited, though, because the data raised expectations China would take steps to stimulate its economy.
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Euro Rallies Amid Bets Ukraine Conflict Contained
The euro rose the most in more than two weeks against the dollar amid speculation technical signals triggered automatic orders to buy the 18-nation currency, and on bets tension over Ukraine won’t escalate into military action.
The yen fell versus the euro as traders weighed prospects the Bank of Japan will boost stimulus to ease the impact of a planned tax increase. The Aussie gained versus all 16 of its major peers. Europe’s shared currency earlier approached a two-week low versus the dollar as a measure of German manufacturing dropped. A gauge of currency volatility sank to a 15-month low.
“The bid interest in the euro-dollar remains,” said Douglas Borthwick, the head of foreign exchange at Chapdelaine & Co. in New York. “The market is getting used to the idea that announced sanctions are political theater, and without much bite. The prospect of Russia acquiring Crimea without bloodshed is gaining momentum.”
The euro jumped as much as 0.6 percent, the biggest intraday gain since March 6, to $1.3876 before trading at $1.3839 at 5 p.m. New York time, up 0.3 percent. The currency fell earlier to as low as $1.3760 after reaching $1.3749 on March 20, the weakest level since March 6.
The European currency rose 0.3 percent to 141.48 yen. The Japanese currency was little changed at 102.24 per dollar.
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