eurozone

The structural yen to euro shift

How well the single currency is performing these days. Since the middle of last month, the euro has appreciated by more than 3% against the dollar and 7% against the Japanese yen. And yet, there remains a deep suspicion regarding the sustainability of these gains. Greece may be about to get the funds they so desperately need but the country remains mired in depression, Spain is not that far behind in terms of their economic and financial misery, and France is really struggling as well.
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05/12/2012 @ 10:08 GMT

Throwing more bricks at Greece

Data/Event Risks • USD: Housing Starts data not a major event risk, but stronger data (as seen with yesterday’s housing data) could support better tone to risk. • EUR: Finance ministers meet on Greece deciding on next bailout payment and further short-fall in funding from relaxation of last week’s targets. Risk for late session volatility, especially given divisions with the IMF.
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20/11/2012 @ 08:08 GMT

It just gets worse for Europe

Some more disturbing economic news out of Europe this morning. In both Germany and France, the services PMI for October recorded yet another significant decline. In addition, the composite PMI for France remains extremely weak at 43.5, implying that the French economy is in recession. For the whole of the eurozone, the composite PMI fell further to 45.7, a very weak reading indeed. The single currency still looks offered, currently trading at 1.2775.
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06/11/2012 @ 11:42 GMT

Northern Europe’s hesitation

The mood music in currency and asset markets remains circumspect as fresh brush-fires break out in Europe. According to a Greek news report, the IMF is reluctant to sanction the next aid instalment to Greece amidst signs that the troika and Athens are further apart than they were admitting last week. A general strike in both Spain and Greece has been earmarked for coming days. Separately, the FT claims today that the governments of northern Europe are not prepared to allow Ireland and Spain to transfer existing bad bank assets from government balance sheets.
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26/09/2012 @ 07:00 GMT

A more synchronous slowdown

The single currency is starting the week on the back foot as it flirts with the 1.29 level on EUR/USD, largely owing to the negative reading on the latest German Ifo number, the main business confidence survey in the eurozone’s largest economy. Looking back over the past 10 years, the latest reading is consistent with growth around the 0.5% around in annual terms. With the German economy having grown a modest 0.5% and 0.3% QoQ in the previous two quarters, it’s not that much of a stretch to see further negative readings into the end of the year.
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24/09/2012 @ 10:25 GMT

Renewed anxiety

In Europe, a multitude of thorny issues continue to raise their ugly heads. According to Der Speigel, the Greek fiscal shortfall is around EUR 20bn, much higher than original estimates. If this is the case, then last week’s decision by the troika to leave Athens may well reflect more fundamental differences than both sides have admitted to. Separately, Angela Merkel and Francois Hollande apparently failed to narrow their differences over how and when to introduce joint eurozone banking oversight.
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24/09/2012 @ 07:15 GMT

A bullish bailout

As the third quarter draws to a close, there’s a fight going on as to what is the biggest worry for markets in the coming quarter. Should it be Europe, the US fiscal cliff, or maybe the slowdown in China? For now, it’s something of a three-way battle and the implications for currencies are far from clear cut. Taking Europe, there is growing speculation that Spain will ask for a bailout next week (FT newspaper today), in a way that will prove the least embarrassing for them.
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21/09/2012 @ 07:19 GMT

Acronym arbitrage

The much awaited presentation from the head of the ECB was largely as expected, given the leaks that were seeping out ahead of the event. The old bond-buying vehicle (SMP), which has in effect been on ice, has been shut. The bonds will just mature over time. A new acronym has arrived in the form of outright monetary transactions. This is where the ECB buys the bonds of countries either receiving help from the rescue vehicles, or a precautionary program (Enhanced Conditions Credit Line).
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06/09/2012 @ 13:51 GMT

Decision day for Draghi

Having promised more than a month ago to “do whatever it takes” to save the euro, ECB President Draghi must show his mettle at tomorrow’s critical meeting of the ECB’s Governing Council. How he explains his much-anticipated sovereign debt-purchase plan will be particularly closely scrutinised. Draghi will almost certainly avoid explicit yield or spread targets, but at the same time must do more than simply commit to respond to occasional spikes in yields.
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05/09/2012 @ 10:27 GMT

The last line in the sand?

The eurozone crisis has had its fair share of lines in the sand, not to mention ‘make or break’ summits of EU leaders. The mid-October meeting is now turning into one of those red line scenarios, with the timing of the latest troika mission to Greece (starting early September) reinforcing the growing feeling that continuing with more support for Greece and more slippage of the country’s targets and reforms cannot continue. But the problem is that EU leaders have not or cannot agree on the alternative and Greece knows it. What does this mean for FX and the single currency?
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28/08/2012 @ 07:11 GMT