Week in FX Europe June 24-29

The reality, market expectations were low heading into this weeks Euro summit. It is only natural to end the week witnessing some further squeezing of the record EUR short positions after this morning early Euro summit announcement. On the whole, the deal does not improve the solvency of indebted nations. It is again allowing banks easier access to more monies. This is not solving the problem, it is making the problem worse. What the euro-zone members have technically agreed to is a quicker fix that allows banks a chance to have even more debt for a while longer.

Once this risk squeeze has run its course and the market realizes that this solution does not solve the problem the quicker we will be trading back in the ‘red’ again. Even the technicals like this scenario. Next weeks market focus will shift back to stateside employment situation and the BoE and ECB to provide additional monetary easing.

Below are some other highlights of the week:


  • ESP: This week started slowly with the inevitable occurring. Spain formally applied for bank aid and the German government warned against hope for easy solutions. Amounts were not specified in the Spanish request, which will be discussed at the July 9th Euro-group meeting. German officials continue to warn markets against expectations for “shared liability.”
  • EU: Market participants spent the beginning of the week appearing to be scaling down their already low expectations for this week’s summit.
  • EU: Mid week and the EU issued a report outlining “vague and generic options for further fiscal and banking integration.” Are they suggesting that they will not go beyond unclear solutions?
  • EUR: German Gfk consumer confidence rose to 5.8 from 5.7 this month. With income expectations rising supported by higher wage agreements earlier in the year does not seem to be having a negative affect just yet.
  • GBP: Data revealed that UK public finances were weak last month, with higher than expected public sector net borrowing ex-interventions at +£17.9b. Analysts note that receipts growth fell to +1.6%, y/y, from +2.4% the previous month. Suggests evidence of a further slowdown in the British economy. On the surprise side was spending, up significantly at +7.9%, y/y.
  • ITL: Italian business confidence rose to 88.9 from 86.6, above consensus for a drop to 85.5.
  • GER: German State inflation numbers are running soft, pointing to a +1.7%,y/y, national rate for June and below the +1.8% consensus. Analysts note that a softer CPI in Germany and weakening activity in the periphery should pave the way for ECB policy next month. This is turn will provide little support for the EUR.
  • UK: CBI reported sales rose strongly last month to 42 from 21 (consensus was for 15). Analysts note this could be due to extended Jubilee bank holiday in the month.
  • GER: German unemployment rose +7k in June and managed to push the unemployment rate up to +6.8%. This is the third consecutive rise in the unemployment count.
  • EU: The European commission confidence surveys continued to fall last month, surprising weaker than expected. Industrial and services confidence were particularly weak, down to -12.7 and -7.4 respectively. Consumer confidence was revised slightly lower, but remains relatively more resilient for now.
  • SEK: Swedish retail sales rose +0.4%, m/m, above consensus for +0.1%. Trade balance for May was also stronger than expected at +SEK9.8b. Export momentum turned slightly positive at +0.1% and this after a -0.9%, q/q, drop in Q1. Analysts expect the Riksbank to keep rates on hold next week.
  • EU Summit: Risky assets have ended the week rallying after EU leaders surprised the markets with measures aimed at reducing market stress. They have managed to surpass very low expectations for today’s summit with some modestly significant decisions.
  • EU Summit: Leaders have agreed that loans to recapitalize Spain’s banking system “would not have to be senior to other claims on the Spanish sovereign and to give the eventual capacity for the bailout funds to lend directly to banks, but only once a pan-euro area bank supervisor has been established.” There was also agreement for the bailout funds to intervene in the member state bond markets if requested.
  • EU Summit: As of writing, there was no agreement on bond buying according to the proposal from Italy to let the EFSF intervene in bond markets more aggressively.
  • GR: It’s rumored that that an IMF team will start negotiating possible changes to the conditions attached to a loan to Greece after a fact-finding mission travels to Athens early next week.
  • CHF: The Swiss KOF barometer rose to 1.16 in June from 0.80 in May. Most of the sub-components contributed to the positive development with the exception of the “banking” module which evolved sideways.
  • NOK: Norway retail sales surprised strong rising +1.6%, month over month. Analysts suggest that a “resilient domestic demand” as well as support from oil prices and investment suggest that the country’s economy is in a comparatively better shape. Norges Bank is expected to remain on hold in the medium term.
  • EUR: Beating analysts expectations, Euro-zone M3 expanded +0.9%, m/m, in May after a -0.5% drop in April.
  • BoE: The ‘Old Lady’ judged the outlook for financial stability has deteriorated in its financial stability report this week. Policy makers suggest that the FSA should consider adjustments to liquidity guidance. Are we to see monetary easing next week?



ASIA Week in FX



  • AUD, GBP and EUR Cbanks deliver their rate and QE recommendations
  • Sales data is presented by CHF and AUD
  • GBP and USD release some manufacturing reports
  • Building and construction data is announced by AUD, GBP and CAD
  • Inflation and PMI reports are presented by GBP, USD, CHF and CAD
  • Employment landscape is analyzed by USD and CAD
  • Demand for Spanish product is tested again after the release of AUD trade


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell