By FXEmpire.com
Analysis and Recommendations:
The EUR/USD fell in today’s session to trade at 1.2610. After a day of negative eco data both in Europe and the US. Unemployment data in the US showed an increase in both continued new and continuing claims. The focus today is Spain and its likely formal request for bank aid later today and what tools the ECB has left to aid them.
Global equities are in a downdraft this morning on the heels of bearish overnight data and disappointment in what the Fed served up yesterday via a bland extension of the same twist program that didn’t really do much of anything positive the first go around. Dow futures are pointing toward a mild drop at the 9:30amET open. Currency markets are generally going long the USD as most major crosses sell off with the exception of the NZ$ following that country’s strong GDP report last evening. US 10s are flat, 10 year bunds are rallying a couple of basis points, and each of Spain, Italy and Portugal are rallying. Oil is down to US$80.6 on a WTI basis, US$92 on a Brent contract. Chinese and European data figured prominently in the risk-off trade. China’s manufacturing sector continues to contract according to the preliminary private sector version of a purchasing managers’ index. The last state PMI for May showed a slip down to the dividing line between expansion and contraction. The deterioration in the soft PMI data has been confirmed by the sharp slippage in hard industrial production figures for China. In year-over-year terms, growth in industrial production has waned from around the 14% mark of a year ago to under 10% today and is likely slipping.
European PMI data continue to indicate deteriorating economic conditions on the continent. The June flash surveys showed that both the manufacturing and service sectors contracted at a faster pace than they had during May. The broad Eurozone manufacturing PMI fell from a reading of 45.1 in May to 44.8 in June while Germany’s manufacturing PMI also showed contraction, falling from 45.2 in May to 44.7 in June. The service sector lost momentum too, falling to a reading of 50.3 in Germany and 46.8 in the Eurozone. These are the lowest readings since 2009. France’s PMIs are showing broad weakness as well, albeit less so than during May (manufacturing improved to 45.3 from 44.7 and services improved to 47.3 from 45.1 – both weak, but not as weak as before). The bottom line is that while the financial crisis might be focused in peripheral Europe, core Europe has certainly caught an economic cold.
Spain auctioned EUR2.22bn of bonds with maturities ranging from 2014 to 2017. Bids to cover were quite high (3.97 for the 4/30/2014 bond, 3.18 for the 7/30/2015 bond, and 3.44 for the 7/30/2017 bond) and the Spanish yield curve has shifted down subsequent to the auction amidst media reports that the ECB or EFSF could hypothetically intervene in markets (a possibility that is only ‘theoretical’ in the words of Germany’s Chancellor Merkel). Bids to cover at Spanish auctions have generally been high since the second tranche of the LTRO was implemented on February 29th, a fact that has not stopped the yield on the Spanish 7/30/2017 bond that was reopened today from moving from a yield of 3.69% on March 1 to 6.07% at auction today (and a high of 6.29% on June 18). One point that we would make is that the bond was initially issued in 2002 with a yield of 5.6% and no one questioned the sustainability of Spanish yields at the time (of course, that was on the other side of Spain’s housing boom, when the outlook for government revenues was stronger). France auctioned just under EUR8.5bn of bonds with maturities ranging from 2014 to 2017 and EUR1.4bn of inflation linked bonds and the UK sold ?3.25bn of bonds maturing in 2022.
FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports
Economic Data Releases for June 21, 2012 actual v. forecast
|
Date |
Currency |
Event |
Actual |
Forecast |
Previous |
|
Jun. 21 |
CNY |
Chinese HSBC Manufacturing PMI |
48.10 |
48.40 |
|
|
EUR |
French Manufacturing PMI |
45.3 |
44.5 |
44.7 |
|
|
EUR |
German Manufacturing PMI |
44.7 |
45.2 |
45.2 |
|
|
EUR |
Manufacturing PMI |
44.8 |
44.9 |
45.1 |
|
|
GBP |
Retail Sales (MoM) |
1.4% |
1.2% |
-2.4% |
|
|
GBP |
Retail Sales (YoY) |
2.4% |
2.0% |
-1.1% |
|
|
GBP |
CBI Industrial Trends Orders |
-11 |
-20 |
-17 |
|
|
Core Retail Sales (MoM) |
-0.3% |
0.2% |
0.3% |
||
|
CAD |
Retail Sales (MoM) |
-0.5% |
0.3% |
0.4% |
|
|
USD |
Initial Jobless Claims |
387K |
380K |
389K |
|
|
USD |
Continuing Jobless Claims |
3299K |
3275K |
3299K |
Upcoming Economic Events that affect the CHF, EUR, GBP and USD
|
Date |
Time |
Currency |
Event |
Forecast |
Previous |
|
Jun 22 |
8:00 |
EUR |
106.9 |
||
|
All Day |
EUR |
||||
|
13:00 |
EUR |
-11.2 |
Upcoming Government Bond Auctions
Date Time Country
Jun 22 15:30 Italy
Jun 25 09:10 Norway
Jun 25 09:30 Germany
Jun 25 10:00 Belgium
Jun 25 15:30 Italy
Jun 26 00:30 Japan
Click here for updated EUR/USD News.
Originally posted here
