Poor euro data leads to losses against major pairs

Claire Hogarth13/Aug/2014Currency Updates

Yesterday, U.S. and European equities paired early gains after Europe reported bad results. The ZEW investors’ sentiment in August dramatically declined for the Eurozone as a whole as well as for Germany. The euro lost approximately 0.2% versus sterling, still buoyed by record short positioning by speculators.

GBP

No news was released on Tuesday for the United Kingdom. Sterling increased by more than 0.2% versus the EUR and the USD.

Today will be far more interesting for the UK. At 09.30 local time reports will be released regarding the average earnings and unemployment figures of the country. The consensus for the employment rate is 6.4% down from 6.5% from previous month. More important data will be released at 10.30 when the Bank of England will report the quarterly inflation. This should definitely affect the GBP.

EUR

Germany’s economic momentum is likely to slow in the second quarter as uncertainty caused by the crises in Ukraine and the Middle East puts a brake on growth in industrial output and exports amid a “very hesitant” recovery in the Eurozone, reported by the Economics Ministry yesterday. This statement was made after the release of bad surveys regarding the ZEW survey of investors’ current assessment of the Eurozone and Germany. The survey declined from 48.1 and 27.1 in July to 23.7 and 8.6 in August, respectively. The expectation for the Eurozone and Germany was 41.3 and 18.2 respectively, which is of course a lot higher than the actual results. The geopolitical uncertainty, particularly from the crisis in eastern Ukraine and Western countries’ sanctions imposed on Russia, have hit investor sentiment and reduced orders for industrial goods as well as output and sales in the second quarter. The EUR declined by more than 0.2% versus the GBP and remained flattish versus the USD. While the ZEW is often volatile, it has now fallen every month since January. Falls of this magnitude usually lead to similar falls on other business sentiment indicators like the PMI.

This morning a bunch of reports were released for Germany, France and Spain. Some results were above expectations and are therefore supporting the EUR. At 10.00 local time, the Eurozone will release industrial production reports with a consensus of 0.3% for June. This release could definitely move the markets, knowing that is was -1.1% for the month May.

USD

Positive second-tier news was released over the Atlantic as the NFIB Business Optimism Index slightly beat expectations. The index shows the optimism of small businesses. Other good news was the increase in job openings, which rose to 4.67 million in June from 4.58 million in May. Compared with the same period in the prior year, June job openings rose 18%, as private-sector openings increased 18% to 4.21 million, and government positions rose to 466,000 from 412,000. The USD lost versus the GBP and remained flattish versus the EUR.

There are a bunch of U.S. releases today. At 13.30 local time retail sales reports for June will be released. The consensus is 0.2% for the month to month basis. This could definitely be a market mover. Noteworthy, are also the speeches of two Federal Reserve’s officials at 14.05 and 14.20. Pay attention to what they say about the current monetary policy. At last, at 15.00 local time, the report of business inventories for June will be released, which is again a potential market mover. The consensus is 0.5%.

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Written by Claire Hogarth

Marketing Executive at Ebury. English Literature graduate from the University of York and a motivated professional.