EUR/USD has leveled off following sharp losses on Thursday (February 14th). The pair dropped close to one cent after weak GDP numbers out of the major Eurozone economies. Growth rates were down in Germany, France and Italy, and failed to meet market expectations. Eurozone GDP also posted a sharp decline. Italian Trade Balance failed to meet expectations, and posted a smaller surplus for the second straight month. In the US, Unemployment Claims looked very sharp. The trading week wraps up with a major release out of the US, UoM Consumer Sentiment. The markets will also be eyeing the Empire State Manufacturing Index, which has posted very weak numbers recently. As well, the G-20 meets in Moscow, and currency exchange rates are expected to be on the agenda.
- Asian session: Euro/dollar was steady, and consolidated at 1.3363. The pair is unchanged in the European session.
- Current range: 1.3360 to 1.34.
- Below: 1.3360, 1.3290, 1.3255 , 1.3170, 1.3130, 1.3110, 1.3030, 1.30 and 1.2960.
- Above: 1.34, 1.3480, 1.3588, 1.3690, 1.3740, 1.3860, 1.3915 and 1.40.
- 1.3360 is providing weak support. 1.3290 is stronger.
- 1.34 is the next line of resistance.
Euro/dollar steady after sharp losses – click on the graph to enlarge.
- All Day: G-20 Meetings (Day 1).
- 9:00 Italian Trade Balance. Exp. 2.22B. Actual 2.16B.
- 10:00 Eurozone Trade Balance. Exp. 10.7B.
- 13:30 US Empire State Manufacturing Index. Exp. -2.1 points.
- 14:00 US TIC Long-Term Purchases. Exp. 34.3B.
- 14:15 US Capacity Utilization Rate. Exp. 78.9%.
- 14:15 US Industrial Production. Exp. 0.2%.
- 14:55 US Preliminary UoM Consumer Sentiment. Exp. 74.8 points.
- 14:55 US Preliminary UoM Inflation Expectations.
For more events and lines, see the Euro to dollar forecast
- Weak Eurozone growth hurts euro: The high-flying euro took a tumble on Thursday, losing close to a cent against the US dollar. The currency took a hit after GDP releases out of the major eurozone members all pointed to contraction. Germany, France and Italy all recorded declines, and all three readings were below the market estimate. The news was no better from the Eurozone economy, which also posted a sharp drop in its GDP. The markets are particularly concerned about economic weakness in Germany, which, as the largest economy in the Eurozone, is the key to the Eurozone getting back on its feet. Senior European officials, including ECB chief Mario Draghi have said that the bloc will not see improvement until late in 2013, but will the markets show the same patience and optimism? The markets reacted in a hurry to the dismal numbers, and if Eurozone releases continue to disappoint, we can expect the euro, which has looked very sharped in 2013, to lose more ground.
- US Employment Numbers Shine: There was good news on Thursday out of the US, as Unemployment Claims fell to 341 thousand, its best showing in five years. The markets had forecast a reading of 361K. The weekly indicator has been well below the 400K rate, but these have not been enough to reduce the unemployment rate, which remains quite high, at 7.9%. The Federal Reserve has reiterated that it will not adjust the interest rate until unemployment falls to 6.5%.
- G-20 to discuss currency wars: The G20 meets in Moscow for a two day meeting on Friday, and one of the topics on the agenda will be the issue of exchange rates. There is mounting concern about countries manipulating their currencies, as Japan and other nations are increasingly relying on monetary policy to kick-start their flagging economies. The G-7, clearly concerned about the high-flying euro and sinking Japanese yen, reiterated its commitment to allow the markets to determine exchange rates. The Institute of International Finance, which is comprised of leading banks and financial institutions, also weighed in on the matter. It urged the G-20 to take steps to avoid the “possible discord on exchange rates”. Although the G-20 will discuss the matter, we’re unlikely to see any fireworks. Given the need to reach a consensus, analysts expect any statement on currencies at the meeting to be mild in nature.
- EU Agrees to Budget Cuts: After marathon negotiations in Brussels, EU leaders reached a deal to cut the EU budget, for the first time in the bloc’s history. The seven-year budget is being trimmed from the current 994 billion euros to 960 billion. The cuts are modest in scale, but nonetheless an important step in reigning in spending. The deal is a hard-fought compromise, as it reduces the budget while providing more funds for agricultural aid. Although all EU leaders have signed off on the agreement, it must be approved by the European Parliament, which is by no means certain. European Parliament head Martin Schulz has already stated that the budget will not pass in its current format, so we could see further developments in this matter.