Daily News And Economic Overview Euro Zone

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Euro zone consist of a lot of country thats have a really strong economic and advance technology in the world. Nowadays euro zone suffer a debt crisis problem, thats make euro currency are a pair thats must analyze using news. Almost 70% trader are trade in EUR/USD Pair. Thats why knowing this pair fundamental are really important.

 

Here we will discuss about Euro Zone Fundamental..

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OECD: Rich Countries Must Reduce Debt (14 April)

 

Paris, (Analysis). Richest countries in the world should immediately take thedifficult steps to reduce debt, a "big challenge" that must be met in order tostabilize their public finances are strained, the OECD said on Thursday (12/4).

2008 global financial crisis has sent soaring levels of debt because the government has spent a lot of expenses, borrowing large amounts to try and keep their economies afloat, the Organization of Economic Cooperation andDevelopment said, AFP reported.

 

Now, their debt averaged 100 percent of Gross Domestic Product for the OECDas a whole, must come down to a much more secure 50 per cent in 2050, he said, but it will require a sacrifice which is not fun.

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Will German GDP/IFO be the catalyst to take EUR/USD back above 1.3000?

The EUR/USD finished the session sharply higher, mainly benefiting from a better than expected European PMI data print. It will be another busy upcoming economic session in Europe, with German GDP due out at 6:00GMT, followed by German IFO at 8:00GMT. One has to ask, if the print comes in better than expected, will it be enough to take the pair back above the critical resistance level of 1.3000(the 20dma)?

According to analysts at Rabobank, “there was a modestly firmer tone, maybe a ‘less downbeat tone’ is a better description because despite improvement they remain sub-50, to the suite of eurozone PMIs. In Germany, the Manufacturing PMI gained to 49.0, up from April’s 48.1 and the Services PMI ticked up to 49.8 from 49.6. France’s Manufacturing PMI increased to 45.5 from 44.4 and the Services PMI held steady at 44.3. For the eurozone as a whole, the Manufacturing PMI gained to 47.8 from April’s 46.7.”

They went on to add,“there’s no particularly strong message in these data but they are consistent with our thinking – and that of the ECB – that Europe’s economy will show some improvement as this year unfolds. Calmer financial market conditions should pay a positive dividend to the real economy over time.”

The ‘risk on’ vs. ‘risk off’ sentiment of the equity market will also be something to keep in mind. It was interesting to see the EUR/USD go well bid on a day when the Nikkei dropped 7%. However, its hard to imagine this correlation continuing should US equities start a serious correction. Furthermore, some analysts believe that just because the recent EU PMI data came in better than expected, EU officials will not deviate from the dovish rhetoric which has been plentiful in recent weeks.

According to Kathy Lien of Bk Asset Management, “unfortunately comments from European officials suggest that they are still very worried about the economic outlook and think that more stimulus could be necessary. According to ECB member Praet, the central bank is looking at all possibilities including reviewing the quality of asset backed securities for possible purchases. ECB member Nowotny expects the economy to contract in 2013 and inflation to decline, which suggest that he also supports new stimulus. However he went on to say that the central bank never pre-commits and their decision will in large part be affected by the new economic forecasts published in June.”

According to Val Bednarik of FXStreet.com, “the EUR/USD, recovered over 100 pips from its daily low at 1.2820, but still remains capped below 1.2950 strong static resistance level. In the 4 hours chart positive momentum persists although steady gains above mentioned resistance are now required to confirm further advances towards 1.3000 key psychological level.”

From a longer term technical perspective, short term moving averages are now neutral on the daily chart, while the RSI (14) remains in bearish set up. Given the fact these indicators are not confirming each other, is a sign market participants may be confused at the near term direction of the pair. Furthermore, The ADX (7) on the daily chart continues to display characteristics of non trending market, sloping sharply downward and sitting near the 18.50 area. To conclude, until these indicators start to tell a different story expect choppy trading to continue.

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German Ifo Sentiment Probabaly Remains Unchanged

German business confidence was probably unchanged in May after two monthly declines amid doubts over the economic recovery.

The Ifo institute’s business climate index, based on a survey of 7,000 executives, will remain at 104.4, according to the median of 44 forecasts in a Bloomberg News survey. Ifo releases the report at 10 a.m. in Munich today.

The German economy, Europe’s largest, grew just 0.1 percent in the first quarter after a 0.7 percent contraction in the final three months of 2012 as an unusually long winter damped construction and investment. The Bundesbank said this week that while risks stemming from Europe’s debt crisis remain high, the economy will gather pace in the current quarter. Factory orders surged for a second month in March and exports increased.

“The economy is expanding very slowly but at least it’s expanding again,” said Andreas Moeller, an analyst at WGZ Bank in Dusseldorf, who predicts the Ifo index will drop to 103.7. “Compared to the rest of the euro area, Germany is doing pretty well.”

Gross domestic product in the 17-nation currency bloc, Germany’s biggest export market, fell 0.2 percent in the first three months this year. It was the sixth straight contraction, making the current recession the longest in the euro’s 14-year history.

ECB Action

The European Central Bank cut its benchmark interest rate to a record low of 0.5 percent on May 2 and President Mario Draghi said he stands ready to act again if the economic outlook deteriorates.

The Frankfurt-based central bank forecasts the euro-area economy will shrink 0.5 percent this year before growing 1 percent in 2014. That compares with the Bundesbank’s prediction of 0.4 percent growth in Germany this year.

Puma SE (PUM), Europe’s second-largest maker of sporting goods, on May 14 cut its revenue and profit forecasts for this year after reporting first-quarter earnings that trailed analysts’ estimates. The “business climate in Europe remains challenging,” the Herzogenaurach, Germany-based company said in a statement.

Some German companies are compensating for weaker demand in Europe with sales to faster growing markets abroad.

Deutsche Post AG (DPW), Europe’s largest postal service, on May 14 reported profit that beat analysts’ predictions because of growth at express-delivery businesses in emerging markets.

“We’ve gotten off to a very solid start for the year in what is a very difficult macroeconomic environment,” Chief Financial Officer Larry Rosen said.

“The German economy will expand for the rest of the year but we should get ready for very low growth numbers,” said Anatoli Annenkov, an economist at Societe Generale SA in London, who predicts the Ifo index will ease to 104 this month. “Uncertainty will continue to weigh on exports to the euro area,” he said.

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Detailed gross domestic product results for the 1st quarter of 2013

 

 

The German economy is slow in gaining momentum. As the Federal Statistical Office (Destatis) already reported in its first release of 15 May 2013, the gross domestic product (GDP) increased by just 0.1 % - upon price, seasonal and calendar adjustment - in the first quarter of 2013 compared with the previous quarter, according to provisional calculations. One of the reasons for this small growth at the beginning of the year, however, was the extremely cold weather. As reported earlier, the German economy had suffered a major setback in the last quarter of 2012 (–0.7%). For the entire year of 2012, GDP values did not change as compared with the figures published so far (+0.7%; calendar-adjusted +0.9%).

 

As regards domestic demand in the reference quarter, different developments were reported. In a quarter-on-quarter comparison, positive contributions were made almost only by household final consumption expenditure, which rose by 0,8 % upon price, seasonal and calendar adjustment. However, they had decreased by 0,3 % in the last quarter of 2012, according to the most recent calculations. As regards gross fixed capital formation, the negative trend of 2012 continued. Gross fixed capital formation in machinery and equipment was down 0.6% on the previous quarter, in construction it fell by 2.1%. General government slightly reduced its final consumption expenditure by 0.1%.

The balance of exports and imports had almost no effect on economic growth in the first quarter of 2013 (contribution to growth of +0.1 percentage points). Although imports of goods and services were down 2.1% on the last quarter of 2012, exports decreased, too (–1.8%).

The following information refers to the year-on-year comparison:

Compared with a year earlier, the price-adjusted GDP was down 1.4% in the first quarter of 2013. However, this considerable decrease was largely due to calendar factors. The reference quarter had fewer working days than the same quarter a year earlier. Reasons are mainly the leap year of 2012 and the fact that the Easter holidays fell into different quarters. In calendar-adjusted terms, the GDP decreased by just 0.2%.

 

The economic performance in the first quarter of 2013 was achieved by 41.5 million persons in employment whose place of employment was in Germany (domestic concept), which was an increase of 293,000 or 0.7% on a year earlier.

Overall labour productivity (price-adjusted GDP per person in employment) declined by 2.1 % in the first quarter of 2013 compared with the first quarter of 2012. When measured per hour worked by persons in employment, however, labour productivity increased slightly by 0.2 % according to first provisional calculations because, on average, the number of hours worked per person in employment was by 2.3 % lower than in the previous year.

On the use side of the gross domestic product, almost all price-adjusted aggregates decreased on the same period a year earlier. However, in 2012, the German economy had started the year with a considerable growth, so that the current decreases are in part basis-related effects. Here are the detailed results:

Businesses and general government continued to cut down on investments – price-adjusted gross fixed capital formation was markedly down on a year earlier both in machinery and equipment (–10.3%) and in construction (–6.2%). Although the largest decrease was recorded for public underground construction, lower gross fixed capital formation than a year earlier was observed for industrial construction and total dwellings, too. Household final consumption expenditure was down 0.4% on the first quarter of 2012. Only government final consumption expenditure rose slightly (+0.3%). On the whole, domestic uses were down 1.4 % on a year earlier.

Foreign trade did not provide any positive contribution in the first quarter of 2013,, either. Although price-adjusted imports of goods and services were down on a year earlier (–2.0%), price-adjusted exports of goods and services, too, decreased in the same period (–1.9%). Consequently, the balance of exports and imports could not compensate for the weak domestic performance and, in a year-on-year comparison, too, it had almost no effect on the GDP (contribution to growth of –0.1 percentage points).

On the production side of the gross domestic product, the individual economic sectors showed quite diverging trends at the beginning of 2013: While the majority of the service branches managed to maintain or improve their economic performance compared with a year earlier, the price-adjusted gross value added in trade, transport, accommodation and food services and in other services was down 1.2% each. The economic performance in construction (–7.2%) and in manufacturing (–4.4%) has been decreasing for a year now.

At current prices, the gross domestic product was up by 0.7 % and the gross national income by 0.8 % in the first quarter of 2013 on the first quarter of 2012. The net national income (at factor costs) rose a total 0.8%, too, with the two components showing most different trends: While the compensation of domestic employees was up 3.4 %, property and entrepreneurial income was down 3.8 % according to first provisional calculations. Wages and salaries of employees rose 3.6 % on a year earlier, in both gross and net terms, but the average increase per employee was only 2.6 % at the beginning of 2013. The disposable income of households rose 0.5 %, the final consumption expenditure of households at current prices increased by 1.1 %. This resulted in a provisional savings ratio of households of 13.1 % in the first quarter of 2013 (for comparison: 13.6% in the first quarter of 2012).

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GfK: Germany's Consumer Morale Seen Improving In June

 

 

German consumer confidence should continue to improve up in June as economic and income expectations brightened slightly in May and willingness to buy remained at an extremely high level, the GfK Group reported Friday.

GfK's consumer climate indicator should rise to 6.5 in June from an unrevised 6.2 in May, the report said. Most analysts had expected little change.

GfK noted that positive consumer sentiment is reflected in first quarter GDP figures. "This confirms GfK's hypothesis that private consumption has developed into a major pillar of economic growth," it said.

Looking ahead, strong consumer sentiment "ostensibly depends on the current extremely good situation in Germany being maintained," GfK said. "However, if the debt crisis escalates once again, the consumer climate is likely to hit hard times."

The report showed that following a moderate fall in April, economic expectations improved slightly in May, rising 1.3 points. "The indicator is currently at -0.2 points and therefore remains around the long-term average of zero," GfK said.

Income expectations extended April's upward trend, with the indicator rising 3.1 points to the highest level since July 2012.

"As a result of the continued stability of the labour market, an improvement in collective bargaining agreements in comparison with previous years for many employees and a falling rate of inflation, the majority of consumers are confident that they will have more disposable income in real terms," the report said.

The sub-index for willingness to buy improved by a marginal 0.1 point to the highest level since March 2012.

"From consumers' perspective, the conditions continue to be ideal for the very good buying sentiment to be sustained," GfK said. A stable labour market and low interest rates encourage consumption, it said.

Meanwhile, aided by the European Central Bank's latest decision to cut interest rates further, Germans' propensity to save dropped to a news historic low in May.

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German business morale rises more than expected in May

 

May 24 (Reuters) - German business morale rose far more than expected in May, rebounding after two consecutive falls and suggesting Europe's largest economy is picking up steam after posting anaemic growth in the first quarter.

The Munich-based Ifo think tank said on Friday its business climate index, based on a monthly survey of some 7,000 firms, rose to 105.7 in May from 104.4 in April.

That compared with a median forecast in a Reuters poll of 40 economists for the business climate index to climb to 104.5 and beat even the highest forecast for 105.5.

The data sent the euro higher against the dollar to a session high of $1.2959 and prompted German bund futures to pare gains.

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Draghi Says Bond-Buying Pledge Helps Transmit Rates

 

European Central Bank President Mario Draghi said his pledge to buy government bonds is helping to ensure that interest-rate cuts reach the parts of the euro-area economy that need them the most.

“Our measures gave breathing space from markets driven by panic, which were forcing the economy into a position where inappropriately high interest rates would make default a self-fulfilling prophecy,” Draghi said in a speech in London. “Today we are seeing some encouraging signs of tangible improvements in financial conditions. Spreads in sovereign and corporate debt markets have narrowed considerably.”

 

Since Draghi pledged last year to buy unlimited amounts of government bonds in exchange for countries signing up to economic reforms, conditions in euro-area financial markets have improved. Even though his so-called Outright Monetary Transactions program has yet to be used, bond yields in distressed countries such as Greece and Spain have dropped from euro-era records and banks’ reliance on ECB funding has declined, indicating confidence is returning.

 

The ECB has “started observing convincing signs that fragmentation on the funding side for banks has decreased greatly,” Draghi said last night. “And although bank lending to businesses and households remains anaemic, we are now seeing some signs of slight improvement on the lending side as well.

 

Challenging Conditions

The yield on Greek 10-year bonds fell below 10 percent on May 3 for the first time since October 2010. It traded at 8.83 percent at 8:28 a.m. in Frankfurt. The yield on Spanish 10-year securities rose 2 basis points to 4.31 percent. The euro was little changed at $1.2937.

The ECB cut its benchmark interest rate to a record low of 0.5 percent this month and Draghi indicated he’s ready to lower borrowing costs again if the economic outlook deteriorates. The Frankfurt-based institution will publish new forecasts in June.

“Economic conditions in the euro area remain challenging” and “labor-market conditions remain weak,” Draghi said. “To maintain and expand the productive capacity of our societies, national governments need to improve the structural functioning of their respective economies.”

 

The “painful” reforms already undertaken by debt-strapped countries “are starting to bear fruit,” he said. “We see this very clearly, for instance, in the impressive improvement in export performance in Ireland, Spain and Portugal and in the recent uptick in industrial production in the latter two countries.”

Europe’s monetary union is more stable than it was a year ago and markets are “fully confident that the euro is a strong and stable currency,” Draghi said.