More signs of recovery

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The EUR/USD rate was not the only financial asset to set new records last week. On Friday, the U.S. 10-year yields finally surpassed the 3% landmark. This is quite a latent, but not entirely unexpected reaction to the previous week’s tapering. In spite of the 10 year yields already surpassing 3% in September 2013, that case is mostly attributed to volatile anticipation for tapering, but this time the tapering is a solid, given fact. The U.S. 10 year yield serves as a benchmark for numerous interest rates. These range from those affecting the real-estate market, such as mortgages, to those fueling equities such as corporate bonds. The low corporate bond interest rates have been regarded as catalysts of soaring equity prices lately. These led to the S&P 500 rising by nearly 30% since the beginning of the year. Likewise, the low mortgage rates in the U.S. may be regarded as primary contributors to the FHFA U.S. House Price Index recording an 8.2% annual increase in October. The affect higher U.S. Government bond yields would have on U.S. assets such as equities and real estate remains to be seen. Register at ANYOPTION and start trading TODAY!

Strong Euro weights down on Eurozone’s recovery

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As Christmas was celebrated by the Christian world last week, it also carried a considerable portion of market participates away from their trading screen, leading to the tradition annual decrease of volumes. Following a rather muted trading week, EUR/USD reached a 2.5 year peak on Friday. The record price was achieved after the EUR strengthened versus the USD by nearly 1.5% during the day, to approximately 1.389 USD. The current level represents nearly a 15% strengthening of the Euro versus the USD since July 2012’s 1.2 levels.

Consequently, the current EUR/USD levels are going to present a bigger problem for European exporters, as those would receive less Euros for their foreign currency to fund their operations. Alternatively, local producers might have a harder time competing with global supply. For example, Germany’s Import Price Index, published on Monday, indicated an annual -2.9% decrease. Undoubtedly, the strengthening Euro had some part in this. 

While the strengthening Euro may be regarded as an equal problem to all Eurozone members, a bigger issue might be the fact that not all of these members had equally recovered from the great recession. For instance, Germany’s GDP currently increases at an annual pace of 1.1%, supported by a quarterly increase of 0.1% in exports. The French GDP, however, was published last week and indicated a muted 0.2% increase, handicapped by a -1.3% decrease of exports during the last quarter. Evidently, not all shared sorrows are halved sorrows. 

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Strong Euro weights down on Eurozone’s recovery

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As Christmas was celebrated by the Christian world last week, it also carried a considerable portion of market participates away from their trading screen, leading to the tradition annual decrease of volumes. Following a rather muted trading week, EUR/USD reached a 2.5 year peak on Friday. The record price was achieved after the EUR strengthened versus the USD by nearly 1.5% during the day, to approximately 1.389 USD. The current level represents nearly a 15% strengthening of the Euro versus the USD since July 2012’s 1.2 levels.

Consequently, the current EUR/USD levels are going to present a bigger problem for European exporters, as those would receive less Euros for their foreign currency to fund their operations. Alternatively, local producers might have a harder time competing with global supply. For example, Germany’s Import Price Index, published on Monday, indicated an annual -2.9% decrease. Undoubtedly, the strengthening Euro had some part in this. 

While the strengthening Euro may be regarded as an equal problem to all Eurozone members, a bigger issue might be the fact that not all of these members had equally recovered from the great recession. For instance, Germany’s GDP currently increases at an annual pace of 1.1%, supported by a quarterly increase of 0.1% in exports. The French GDP, however, was published last week and indicated a muted 0.2% increase, handicapped by a -1.3% decrease of exports during the last quarter. Evidently, not all shared sorrows are halved sorrows. 
 
Register at ANYOPTION and start trading TODAY!

Strong Euro weights down on Eurozone’s recovery

Register at ANYOPTION and start trading TODAY!

As Christmas was celebrated by the Christian world last week, it also carried a considerable portion of market participates away from their trading screen, leading to the tradition annual decrease of volumes. Following a rather muted trading week, EUR/USD reached a 2.5 year peak on Friday. The record price was achieved after the EUR strengthened versus the USD by nearly 1.5% during the day, to approximately 1.389 USD. The current level represents nearly a 15% strengthening of the Euro versus the USD since July 2012’s 1.2 levels.

Consequently, the current EUR/USD levels are going to present a bigger problem for European exporters, as those would receive less Euros for their foreign currency to fund their operations. Alternatively, local producers might have a harder time competing with global supply. For example, Germany’s Import Price Index, published on Monday, indicated an annual -2.9% decrease. Undoubtedly, the strengthening Euro had some part in this. 

While the strengthening Euro may be regarded as an equal problem to all Eurozone members, a bigger issue might be the fact that not all of these members had equally recovered from the great recession. For instance, Germany’s GDP currently increases at an annual pace of 1.1%, supported by a quarterly increase of 0.1% in exports. The French GDP, however, was published last week and indicated a muted 0.2% increase, handicapped by a -1.3% decrease of exports during the last quarter. Evidently, not all shared sorrows are halved sorrows. 
 
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Different news makes markets volatile

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Last week the PMI releases delivered on their highly anticipated comeback. It started with Manufacturing Purchasing Managers’ Indices showing mostly positive figures around the Eurozone. These included Italy, with a print of 51.4 versus the anticipated 50.8 and Germany with 52.7 versus expectations for 52.5, not to mention the U.K.’s PMI, which scored no less than 58.4 points, 2.3 more than analysts had predicted. Expectations for increased local demand seem to have weakened the Euro as it began trading at around 1.3540 USD soon after the release of the PMIs, 0.5% below the levels that were traded just before their release. 

The Euro’s upside, however, came from a rather unpredictable front, as Tuesday saw surprising pessimism in its equity market. The German DAX index lost nearly 2% during the trading day, while the Paris CAC 40 presented even higher losses. One asset’s pessimism is another’s opportunity, it seems; as the Euro’s weakness from the previous day diminished rather entirely, with EUR/USD trading back at around 1.3600 levels. 

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When rumors appear brighter than the news

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EUR/USD trading last week was subject to breaking events from both sides of the Atlantic. New York Fed President Dudley, who is considered a member of the dovish set among FOMC members, expressed his hope that the U.S. economy had reached a turning point, hopefully leading to more substantial improvement in labor market conditions. Such thinking among FOMC doves was not evident in previous FOMC discussions. However, Dudley’s words did not convince markets of an imminent taper, as the USD traded mixed to lower against most major currencies.
Most of the weekly drama revolving the Euro was rumor-based. Rumors started surfacing on Wednesday and suggested that the ECB is considering a lower of deposit rates from what currently is zero to a negative -0.1%. The ECB did not confirm any of it, yet the rumor sufficed to see the EUR/USD immediately losing close to a cent. The rest of the day saw the release of the Fed’s October minutes. However, it is advocating the idea that advances in the job market would lead to tapering was already priced in the markets as those saw little change.
On Thursday, the EUR/USD has retracted from the previous day’s drop, as ECB President Mario Draghi attempted to slow down the rumor mill. At a speech in Berlin, when explaining what led the ECB to cut its main policy rates two weeks before, Draghi asked that the audience will not try to infer from his words on the possibility of negative rates on the deposit facility. Draghi added: “As I said in the press conference this was discussed in the last monetary policy meeting, and there are no news since then… because people tend to put things together and create their own dreams". 

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