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PMI Deterioration Could Trigger ECB Cut
PMI Deterioration Could Trigger ECB Cut
- We believe deteriorating PMIs could trigger a move from the ECB. We now expect the ECB to lower interest rates at the June meeting. We expect a one-off rate cut of 25bp - leaving the refi rate at 0.75%. Deposit rates are likely to be left unchanged while the marginal lending rate is expected to be lowered 50bp to 1.25%.
- If market sentiment worsens on Greek or Spanish concerns, this could trigger additional non-standard measures such as longer maturity LTROs. This is not our main scenario though as we continue to expect a viable solution in Greece.
- The euro area composite PMI dropped from 46.7 in April to 45.9 in May driven by a drop in manufacturing PMI. The German Ifo also gave in and dropped in May.
Details and outlook
The euro ...
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Oil steadies above $105 as Iran talks stall
(Reuters) - Brent crude oil steadied above $105 per barrel on Thursday as reports of a hiccup in talks with Iran over its nuclear program balanced weak economic data from China and Europe.
Iran accused world powers on Thursday of creating "a difficult atmosphere" that hindered negotiations on its atomic energy program, signaling a snag in diplomacy to defuse fears of a covert Iranian bid to develop nuclear bombs.
Brent crude oil fell 53 cents to a low of $105.03 per barrel, a five-month low, but then rebounded to trade around $105.71, up 15 cents, by 0945 GMT. It had earlier touched a high of $106.68 before the Chinese and European data sparked a bout of selling.
U.S. crude advanced 55 cents to $90.45, after earlier reaching a high of $90.81 per barrel. It settled at $89.90 a barrel on ...
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Market Drivers - Currencies : 24/05/2012
Today's Comment
Yesterday we stated that a Chinese PMI figure below 49 would have a negative effect on the financial market. The Chinese PMI came out at 48.7, i.e. a fall from 49.3 last month … the effects of the fall is very evident in the FX market, particularly in respect of commodity-related currencies. This supports our scenario that the economy (global) is lagging a bit behind here in the second quarter, which can particularly be attributed to the renewed outbreak of the European debt crisis.
The PMI index has now been below 50 for seven months on end. This is very concerning, particularly because many investors maintain their positive investments as they expect that China will be in for a soft landing. If the landing is to be soft, the Chinese PMI figures will have to increase ...
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U.K. first-quarter GDP downwardly revised to add to worries
U.K. GDP first quarter reading showed worse than expected contraction, adding to concerns the British economy needs more time to recover amid the escalating European debt crisis and weak consumer demand.
The preliminary reading was downwardly revised to 0.3% contraction from both advanced and expected readings of -0.2%, while on the year 0.1% contraction was recorded from both flash and estimated readings of 0.0%.
Details with the release showed that the quarterly drop was triggered by the drop in exports to 0.1% from 1.6% while imports, on the other hand, advanced 0.4% from 0.9%.
In fact, the drop in exports reflect the weak demand from the euro area, U.K.’s main trading partner, and worldwide in addition to the strengthening sterling in the first quarter.
Gross fixed capital ...
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UK shares edge up cautiously from lows
(Reuters) - Britain's top shares rose on Thursday, clawing back some of the previous session's steep losses, though trade remained cautious after a European summit failed to produce concrete proposals for tackling the region's debt crisis.
Markets rallied earlier in the week on hopes that new proposals would be made at the informal summit, including ways of sparking economic growth and boosting investor confidence.
Thursday's economic data made for grim reading, with Britain falling deeper into recession than first thought in the first quarter after a sharp drop in construction output.
In Germany, the manufacturing sector shrank and business sentiment plummeted in May, heightening concerns about the ability of Europe's largest economy to weather the region's crisis.
Market moves have ...
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YouTradeFX Daily Market Analysis : 24/05/2012
Fundamental News
Today’s highlights:
- German GDP (QoQ) (GER, 07:00 GMT)
- French Manufacturing PMI (FRA, 07:00 GMT)
- German Manufacturing PMI (GER, 08:00 GMT)
- German Ifo Business Climate Index (GER, 09:00 GMT)
- GDP (QoQ) + Business Investment (QoQ) + BBA Mortgage Approvals (GB, 09:30 GMT)
- Initial Jobless Claims + Core Durable Goods Orders (MoM) (U.S, 13:30 GMT)
- ECB President Draghi Speaks (EUR, 14:00 GMT)
- Treasury Secretary Geithner Speaks (U.S., 19:00 GMT)
Demand for new U.S. homes rose more than forecast in April, indicating residential real estate may contribute to economic growth for the first time in seven years. Purchases rose to a 343,000 annual rate, up 3.3 percent from a revised 332,000 in March, the Commerce Department reported today in ...
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EUR/USD Cedes The 1.2624 Support
Sunrise Market Commentary
- Fixed Income: Risk off pushes German bond yields to new lows
- Risk off sentiment pushed core bonds higher and non-core bond yield spreads re-widened substantially. The Summit didn't bring new information, but another hole found in Spain's regions' budgets might get attention today.
- Currencies EUR/USD cedes the 1.2624 support
- On Wednesday, the EMU debt crisis was again omnipresent. Markets feared that the EU leaders wouldn't be able to take decisive action to address the debt crisis. Extreme risk aversion pushed EUR/USD to a new low for 2012. The losses of EUR/GBP were more contained, as poor UK retail sales and rather soft BoE minutes kept the door open for more policy stimulation.
The Sunrise Headlines
- In the final hour of trading, US ...
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European Manufacturing And Services Resume Contraction Amid Worries Of A Greek Exit From The Euro Ar
European manufacturing and services showed contraction in May, adding to concerns the economy is heading towards a recession in the second quarter amid the escalating European debt crisis.
Euro area manufacturing and services remained to record contraction in May as manufacturing posted 45.0 from 45.9 in April while services reported 46.5 from 46.9. Accordingly, the PMI composite index came in at 45.9 from 46.7.
The reading in Germany showed a drop in PMI manufacturing to 45.0 this month, the lowest in 35 months, from 46.2 in April. In France, the manufacturing gauge slipped to 44.4 in May from 46.9 a month earlier.
On the other hand, German services lingered at 52.2 while French services index was unchanged at 45.2.
In fact, the 0.5% expansion recorded by the German economy saved the ...
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EUR/USD breaches the 1,26 level
MORNING BRIEFING: EUR/USD breaches the 1,26 level
What’s new:
Equity: Asian and US equities remain pressured on Greece and softer Chinese HSBC flash PMI
Eurozone: The EU summit wants Greece to stay but no tangible measures as yet
Forex: EUR/USD below key support at 1.2650; 1.25 is now eyed
Rates in Asia and Indices:
EUR/USD 1.2555 1.2599 0.01 %
USD/CHF 0.9533 0.9566 0.03 %
GBP/USD 1.5668 1.5701 -0.03 %
USD/JPY 79.41 79.57 -0.02 %
EUR/CHF 1.2009 1.20117 0.00 %
EUR/JPY 99.72 100.18 -0.04 %
Dow Jones 12311.56 12508.3 -0.05 %
Nasdaq 2499.3 2553.19 0.31 %
S&P 500 1296.53 1320.71 0. ...
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