There are talks about reforms in the euro zone. Fundamental analysis for 08.09.2014
08.09.2014
Friday's data on the labour market came out quite weak. Only 142k new jobs were created in August, which is well below the monthly average index over the past six months at 226k. The situation was smoothed over with the fall in unemployment to 6.1%, the best data for the last six years. Consequently, the intrigue surrounding a possible rate hike will only increase.
Support will come from a more detailed report on the labour market - namely, the wage growth of 2.5%, decrease in the number of "long-term unemployed", as well as Americans who do not work full time. There is another nuance, in most cases the August data is usually subsequently revised in a positive way. On average, the adjustment is 31k, which can lead figure into the area of 180k.
In such a situation, any certainty in the policy of the Fed will not appear until after the September labour market data. If the latest data really will be revised for the better, and the new release will come out again above the 200k, then Janet Yellen can justifiably claim the possibility of an early rate hike. We are not likely to hear anything concrete at the next meeting.
Meanwhile, in the euro area there is still an ongoing debate about the possibility of a combination of some growth-promoting programs to further reduce costs. From Italy, which turned into a new recession in the second quarter, there are calls for further deepening of reforms in the labour market and the Europe-wide simplification of the business environment which should give impetus to economic activity.
After these statements from the Minister of Economy of Italy Carlo Padoan, the first thing that comes to mind is that it’s a bit too late. A statement about the reform is certainly needed, but the effect is not immediately evident, as the recession continues to move confidently into a counterattack. Therefore, if drastic measures are not taken now, and plans to reduce costs will be zealously performed, the subsequent stagnation can ruin the standing effect of the reforms that had to be taken a few years ago.
I continue to hold transactions for sale in the Eurodollar. After the decision of the ECB to lower rates I expect a further fall in the pair after the current correction, which is likely to have a side character. Further confirmation of the deteriorating situation in the euro area became the first in the last year negative value of the index of investor confidence from Sentix.
RoboForex Analytical Department
Support will come from a more detailed report on the labour market - namely, the wage growth of 2.5%, decrease in the number of "long-term unemployed", as well as Americans who do not work full time. There is another nuance, in most cases the August data is usually subsequently revised in a positive way. On average, the adjustment is 31k, which can lead figure into the area of 180k.
In such a situation, any certainty in the policy of the Fed will not appear until after the September labour market data. If the latest data really will be revised for the better, and the new release will come out again above the 200k, then Janet Yellen can justifiably claim the possibility of an early rate hike. We are not likely to hear anything concrete at the next meeting.
Meanwhile, in the euro area there is still an ongoing debate about the possibility of a combination of some growth-promoting programs to further reduce costs. From Italy, which turned into a new recession in the second quarter, there are calls for further deepening of reforms in the labour market and the Europe-wide simplification of the business environment which should give impetus to economic activity.
After these statements from the Minister of Economy of Italy Carlo Padoan, the first thing that comes to mind is that it’s a bit too late. A statement about the reform is certainly needed, but the effect is not immediately evident, as the recession continues to move confidently into a counterattack. Therefore, if drastic measures are not taken now, and plans to reduce costs will be zealously performed, the subsequent stagnation can ruin the standing effect of the reforms that had to be taken a few years ago.
I continue to hold transactions for sale in the Eurodollar. After the decision of the ECB to lower rates I expect a further fall in the pair after the current correction, which is likely to have a side character. Further confirmation of the deteriorating situation in the euro area became the first in the last year negative value of the index of investor confidence from Sentix.
RoboForex Analytical Department
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Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex bears no responsibility for trading results based on trading recommendations described in these analytical reviews.