EUR/USD was slightly higher as the pair was helped by positive PMI data out of France, Germany and the Euro-zone. French and German Flash Manufacturing PMIs led the way with readings better than the estimate. A meeting between the Euro-zone finance ministers and the IMF failed to reach an agreement on Greece, but Chancellor Angela Merkel said that it was possible that a solution could be found when the two sides meet again early next week. In the US, the markets are closed today for the Thanksgiving holiday.
- Asian session: Euro/dollar edged downwards, consolidating at around 1.2850. The pair is steady in the European session.
- Current range: 1.28 to 1.2880.
- Below: 1.28, 1.2750, 1.2690, 1.2624, 1.2590, 1.25, 1.2440, 1.2390, 1.2250, 1.2140 and 1.2042.
- Above: 1.2880, 1.2960, 1.30, 1.3030, 1.3080, 1.3140, and 1.3170.
- 1.28 has strengthened in support as the pair improves.
- 1.2880 is the next line on the upside, providing weak resistance.
Euro/dollar higher on positive European PMIs– click on the graph to enlarge.
- 8:00 French Flash Manufacturing PMI. Exp. 44.1 points. Actual 44.7 points.
- 8:00 French Flash Services PMI. Exp. 45.3 points. Actual 46.1 points.
- 8:30 German Flash Manufacturing PMI. Exp. 45.9 points. Actual 46.8 points.
- 8:30 German Flash Services PMI. Exp. 48.5 points. Actual 48.0 points.
- 9:00 Euro-zone Flash Manufacturing PMI. Exp. 45.6 points. Actual 46.2 points.
- 9:00 Euro-zone Flash Services PMI. Exp. 46.1 points. Actual 45.7 points.
- Day 1: EU Economic Summit.
- 9:46 Spanish 10-year Bond Auction. Actual 5.52%.
- 15:00 Euro-zone Consumer Confidence. Exp. -26 points.
For more events and lines, see the Euro to dollar forecast
- Positive European PMIs bolster euro: The markets cheered as PMI data from France, Germany and the Euro-zone was mostly positive. Manufacturing PMI data from all three locations exceeded their respective estimates. The strong figures are certainly a welcome development and have helped boost the euro, which has been under a lot of pressure lately.
- Cease fire announced in Israel, Gaza: After a week of heavy fighting, a ceasefire was finally reached between Hamas and Israel late on Wednesday. The violence flared right up to the ceasefire deadline, and there is deep skepticism whether the fragile truce will hold. If the situation stabilizes, Egypt will act as an intermediary for further discussions between Hamas and Israel, such as reopening the crossings between Gaza and Israel.
- Greek saga continues as Eurogroup, IMF deadlocked: The Euro-zone finance ministers and the IMF huddled in Brussels on Tuesday for over 12 hours, but the marathon talks failed to produce a breakthrough over what action to take on the Greek debt crisis. The Euro-zone finance ministers wish to Greece a two-year extension, till 2022, to slash its debt to 120 percent of GDP. Currently, the debt to GDP ratio stands at 176 per cent. The IMF is against the extension, preferring to see EZ member states write off some of Greece’s debt. Without some agreement, the troika cannot give Greece the next tranche of aid, which amounts to some 44 billion euros. The parties will meet again on Monday, and Chancellor Merkel sounded cautiously optimistic that an agreement can be reached. However, even if a deal is reached, it will still have to be approved by the parliaments in several countries. For its part, Greece continues to implement reforms demanded by the troika. These include an overhaul of the tax system, the creation of a committee to supervise budget execution and further privatizations.
- Moody’s downgrades France: The Moody’s credit agency downgraded France from its AAA rating to AA1. The agency followed up with a tough assessment, warning that France’s economic outlook remains “negative”, and that it had doubts that the Hollande government could implement necessary structural reforms and spending cuts. Moody’s also noted that the French economy was at risk due to other struggling Euro-zone members. The downgrade followed a scathing report in the prestigious Economist magazine about the perilous state of the France’s economy, entitled “The time bomb at the heart of Europe”. The French government is fuming over the downgrade and unflattering magazine article, which may well cause investors and companies to think twice before doing business with France.
- Markets positive over fiscal cliff co-operation: The markets were pleased with a recent meeting between congressional leaders and President Obama as Republican and Democrats sounded upbeat about reaching an agreement over the looming fiscal cliff crisis. Politicians on both sides are seeking to reassure nervous taxpayers and investors that they will take fast and decisive action to avoid massive tax hikes set to occur in January. However, Republicans and Democrats are far apart on how best to reduce the staggering US debt, and reaching a compromise promises to be a difficult task.
- Catalan election could lead to calls for independence: With the markets focused on Greece, and Madrid managing without a bailout for now, Spain has not been on the front pages lately. That could change next week, a the region of Catalonia holds elections on November 25. The independence movement is enjoying growing support, as many Catalans are unhappy about propping up other regions while they are forced to make cuts and ask the central government for aid. However, the central government has balked at giving Catalonia more of a say in its finances, which has only served to fan the separatist flames. If the pro-independence parties win the upcoming election, we could see more unrest, which is the last thing the country needs as it struggles with severe economic problems.