The euro remains under pressure as weak GDP numbers out of the Eurozone last week are weighing on the currency. Growth rates of the major Eurozone economies were down, pointing to the word that the markets hate to hear – recession. In the US, Consumer Sentiment and the Empire Manufacturing Index both beat the estimate. The G-20 concluded its meeting in Moscow, and issued a mild statement about currency exchange rates. In Monday fundamentals, Eurozone Current Account looked weak, falling well short of the estimate. The markets will be listening carefully as ECB head Mario Draghi speaks to the European Parliament’s Economic and Monetary Committee in Brussels. US markets are closed on Monday for Presidents Day.
The euro has enjoyed a strong 2013, but the currency hit some turbulence last week, as Eurozone GDP releases for Q4 of 2012 pointed to negative growth. Germany, France and Italy all recorded contraction in their economies, as did the Eurozone economy. ECB head Mario Draghi has declared that the bloc’s economy will rebound later in the year, but is this little more than wishful thinking? The ECB has forecast that the Eurozone economy will shrink by 0.3% in 2013, so Draghi’s optimism could be premature. The euro, which enjoyed a tremendous run in January, has reversed course, losing about 300 points in February. If the markets continue to see weak Eurozone numbers, the euro could take it on the chin from the US dollar.
In the US, UoM Consumer Sentiment and the Empire State Manufacturing Index looked sharp. Consumer Sentiment rose to 76.3 points, exceeding the estimate of 74.8 points. The Manufacturing Index jumped 10 points, well above the forecast of -2.1 points. The markets were pleased with the data, as both indicators have been struggling recently. If US indicators continue to point upwards, we could see the dollar make inroads against the euro.
In other news, the G-20 concluded a two-day meeting in Moscow on the weekend. The talks were attended by finance ministers and central bank governors, and the final statement included a mild comment on the recent volatility in exchange rates. The leaders pledged not to “target our exchange rates for competitive purposes”, and to move more rapidly to market-determined exchange rate systems. The G-20 statement did not make reference to Japan, which has come under fire for monetary policies which have led to free-fall in the value of the Japanese yen. The G-20 also stated that more effort was needed to continue to strengthen the Eurozone, by building a stronger economic and monetary union.
EUR/USD for February 18 at 11:00 GMT
1.3354 H: 1.3379 L: 1.3322
EUR/USD is trading in the mid 1.33 range as we begin the new trading week. On the upside, the line of 1.3350 is under pressure, and could face more activity during the day. There is stronger resistance at the round number of 1.34. The pair is receiving support at 1.3280.
Current range: 1.3280 to 1.3350
Further levels in both directions:
Below: 1.3280, 1.3240, 1.3170, 1.3130, 1.3080, 1.3030, 1.30 and 1.2960, 1.2835 and 1.2805.
Above: 1.3350, 1.34, 1.3480, 1.3568 and 1.3627, 1.3797 and 1.3858.
OANDA’s Open Position Ratios
The EUR/USD ratio has started the trading week with strong movement in favor of long positions. This is not currently reflected in the currency pair, but signals an expectation that the euro will show some improvement against the US dollar. There are only two releases on Monday, so it could be a quiet day for EUR/USD, as it trades in the mid-1.33 range.
- 9:00 Eurozone Current Account. Estimate 15.3B Actual 13.9B.
- 14:30 ECB President Mario Draghi Addresses European Parliament’s Economic and Monetary Committee
*Key releases are highlighted in bold
*All release times are GMT
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