Beleaguered Euro set for further losses
Another torrid day for the single currency yesterday after Otmar Issing (ECB chief economist) pointed out that weak economic growth had reduced inflationary pressures, and hinted that financial markets might be right to price in a possible rate cut.
The report suggested that any further weak economic data from the eurozone (a certainty you may argue) might well precipitate a cut in the base interest rate. This news following on from the failure of EU budget talks over the weekend seemed just the catalyst the market was looking for to push the Euro lower following the recent political debacle suffered by Europe.
Further euro weakness can also now be argued as carry trades begin to be placed through the Euro (funding through euro and investing into higher yield foreign denominated assets) in replacement of the increasingly expensive Dollar carry trades.
Balancing the scales somewhat however is the simple fact that a weaker euro should actually stimulate the export economy in the eurozone, and help to counteract the inflationary pressures from spiralling oil prices, thus eventually negating the need for a rate cut….watch this space…
Data for the day (already released) begins in France in the form of May Consumer Spending. This materialised at –0.9% (largest month on month drop since August 1997) from a –0.2% forecast, as rising unemployment and weaker auto sales impact following an unusually strong April.
The only other release of note today is the 10am release of June ZEW Business Survey from Germany. Look for an increase to circa 20.0 on the expectations component (13.9 last time out) as the announcement of an early general election and the likelihood of a new government increases optimism. In addition, the recent Euro weakness should have improved the situation for export-oriented companies. However, the recent economic figures in Germany have mainly disappointed and as a result look for no improvement in the current conditions component of the survey (-69.0)
Technical levels for the day
GBPUSD rally stalled yesterday and bullish signals rolling over to bearish, now citing weakness to support at 1.8190 and 1.8110. Resistance remains at 1.8310 and 1.8400.
EURGBP rally to 0.6715 last week now 70% unwound, with majority of indicators pointing for a further charge down to support at 0.6625, 0.6575 should this breach. Resistance at 0.6680 and 0.6725.
Finally for the day, EURUSD has a 1.2120 pivot that needs to breach to confirm a downtrend to support at 1.2060 and 1.2015. Resistance at 1.2185 and 1.2240
The report suggested that any further weak economic data from the eurozone (a certainty you may argue) might well precipitate a cut in the base interest rate. This news following on from the failure of EU budget talks over the weekend seemed just the catalyst the market was looking for to push the Euro lower following the recent political debacle suffered by Europe.
Further euro weakness can also now be argued as carry trades begin to be placed through the Euro (funding through euro and investing into higher yield foreign denominated assets) in replacement of the increasingly expensive Dollar carry trades.
Balancing the scales somewhat however is the simple fact that a weaker euro should actually stimulate the export economy in the eurozone, and help to counteract the inflationary pressures from spiralling oil prices, thus eventually negating the need for a rate cut….watch this space…
Data for the day (already released) begins in France in the form of May Consumer Spending. This materialised at –0.9% (largest month on month drop since August 1997) from a –0.2% forecast, as rising unemployment and weaker auto sales impact following an unusually strong April.
The only other release of note today is the 10am release of June ZEW Business Survey from Germany. Look for an increase to circa 20.0 on the expectations component (13.9 last time out) as the announcement of an early general election and the likelihood of a new government increases optimism. In addition, the recent Euro weakness should have improved the situation for export-oriented companies. However, the recent economic figures in Germany have mainly disappointed and as a result look for no improvement in the current conditions component of the survey (-69.0)
Technical levels for the day
GBPUSD rally stalled yesterday and bullish signals rolling over to bearish, now citing weakness to support at 1.8190 and 1.8110. Resistance remains at 1.8310 and 1.8400.
EURGBP rally to 0.6715 last week now 70% unwound, with majority of indicators pointing for a further charge down to support at 0.6625, 0.6575 should this breach. Resistance at 0.6680 and 0.6725.
Finally for the day, EURUSD has a 1.2120 pivot that needs to breach to confirm a downtrend to support at 1.2060 and 1.2015. Resistance at 1.2185 and 1.2240
posted by Wise Money @ 8:59 AM
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