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Market Expectation The EuroTitle:
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 ...
Title:
European Market Update : 24/05/2012
Major European PMI Manufacturing data misses expectations; German IFO Business Confidence falls for the first time in 7 months
Economic Data
(RU) Russia Gold & Forex Reserve w/e May 18th: $514.3B v $518.8B prior
(DE) Germany Q1 Final GDP Q/Q: 0.5% v 0.5%e; Y/Y: 1.7% v 1.7%e; GDP WDA Y/Y: 1.2% v 1.2%e
(DE) Germany Q1 Private Consumption: 0.4% v 0.2%e; Government Spending: 0.2% v 0.3%e; Domestic Demand: -0.3% v 0.0%e; Capital Investment: -1.1% v -0.3%e; Construction Investment: -1.3% v -0.4%e; Exports: 1.7% v 0.9%e; Imports: 0.0% v 0.3%e
(CH) Swiss Apr Trade Balance (CHG): 1.3B v 1.9Be; Real Exports M/M: -0.9% v +0.2%e; Real Imports M/M: 2.6% v 5.9% prior
(FI) Finland Apr PPI M/M: -0.1% v +0.4% prior; Y/Y: 1.4% v 1.4% prior
(FI) Finland Apr Preliminary Retail Sales Volume Y/Y: -2.0% v ...
Title:
Markets vs. Technocrats
Forex News and Events:
Over the past few days, the media has been relaying comments suggesting leaders are backing the stay of Greece in the EMU. For starters the G8 stressed the importance for Greece to remain in the monetary union regardless of the discord over how to best tackle the crisis. During an interview with CNBC on Tuesday, former Greek PM insisted that an exit would yield “catastrophic” consequences for the country itself and “far reaching” implications for the EU. During yesterday’s European session however, EU officials stated they have agreed over a teleconference call with Eurogroup Work Group (EWG) that each nation in the EMU must prepare an individual contingency plan in case of an exit. The EUR sank against the USD to its lowest level since July 2010 at 1.2544, down 5. ...
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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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Persistent fears over debt crisis keep the euro near its lowest in 22 months
Investors continue to limit their risk exposure on Thursday, heading towards the safe haven dollar and the Japanese yen, as European leaders failed to adopt concrete actions during yesterday’s summit while manufacturing in China is seen shrinking for a seventh month in May according to HSBC.
With the risk of Greece exiting the euro zone not being eliminated by officials yesterday, the sentiment is seen negative, pushing the euro near the lowest since July 2010, especially after Italian Prime Minister Mario Monti backed French President Francois Hollande’s proposal of jointly underwrite regional bonds that Germany still opposes.
The risk remains subdued and markets trade with volatility today as data may show that Europe’s services and manufacturing industries shrank for a fourth month, ...
Title:
Dukascopy Morning Forex Overview : 24/05/2012
Fundamental Analysis
EUR
Concern about Greece "is a big weight on the market and makes things uncertain"
- Emmanuel Soupre, a fund manager at Neuflize Private Assets
European stocks tumbled on Wednesday, after rising by the most in a month on Tuesday, on speculation Greece may exit the euro zone.
USD
"It’s very clear now that the housing market has turned a corner"
- Richard DeKaser, deputy chief economist at Parthenon Group LLC
Sales of new U.S. homes rose by more than expected in April, Commerce Department data showed on Wednesday. Purchases increased to an annual rate of 343,000, up by 3.3 per cent from a revised 332,000 in March.
GBP
" employment remains fragile and wage growth weak"
- Ross Walker, chief U.K. economist at Royal Bank of Scotland Group
U.K. retails sales declined by ...
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EUR/USD Falls to 21-Month Low
The EUR/USD fell as low as 1.2614 yesterday, a 21-month low, after investors grew increasingly concerned regarding Greece's fate in the euro-zone and shifted their funds to safe-haven assets. The currency pair staged a mild upward correction later in the day, eventually stabilizing around the 1.2655 level. Turning to today, euro traders will want to pay attention to several potentially significant news events. Specifically, the German Manufacturing PMI and Ifo Business Climate may help the euro recoup some of yesterday's losses if they come in above expectations.
Economic News
USD - Dollar Sees Significant Gains amid Risk Aversion
The US dollar moved up against several of its main currency rivals yesterday, as ongoing fears regarding Greece's future in the euro-zone have led to risk ...
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U.K. GDP expected unrevised as recession keeps weight on BoE
The United Kingdom today continues to release more important fundamentals that only reassure the lingering hurdles ahead of policy makers` next decision. The second reading for the first quarter GDP is expected unrevised today as the economy contracts with slowing capital investment and exports that were hit by weak global growth.
The ONS is expected to report the unrevised quarterly contraction of 0.2% in the first three months of the year and hold flat on the year as the BoE suffers to support growth. With the deterioration in the jobs market and high inflation Britons remain under pressure and so far policy makers.
As the MPC said it, we are against a tough task, especially after they raised short term inflation expectations and revised lower growth estimates in the May inflation ...
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Asia Session: Policy Easing From Beijing May Not Save China If Greece Exits The Euro
Despite another below 50 print for Chinese flash manufacturing PMI and the release of NZ’s annual budget, market action was largely subdued during the session following the sell-off in the euro overnight which pushed it below 1.2600 against the dollar. The budget out of NZ was largely a non-event as it didn’t differ from market expectations, but the flash PMI figure out of China is somewhat worrying.
HSBC’s flash manufacturing PMI figure printed at 48.7 for May, modestly down from the prior 49.3. Thus, HSBC believes manufacturing in China may contract for the seventh straight month in row, which, if turn, raises concerns about the overall health of the Chinese economy.
Yet, we did not see commodities currencies and equities sink significantly after the data, but this may be because the ...
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