Spain inspires growth. Fundamental analysis for 06.05.2014
06.05.2014
Extremely strong European PMI data helped the Eurodollar to resume growth. In the first place, the data from Spain was very positive, where the growth rates of the services PMI were highest since March 2007. Moreover, there was a serious decline in unemployment - by 111.6 k. In the first quarter, GDP grew by 0.4%, while in the second, if the PMI maintains such dynamics, growth may be more significant.
The leader in growth remains the German economy; however the move to pre-crisis growth rates (at least in terms of PMI) in Spain, once a problematic economy, is a serious positive note for the “bulls”. With such statistics, the outcome of the next meeting of the ECB is practically predetermined. The likelihood that with such positive data, Mario Draghi will change something in the monetary policy, tends to zero.
All of the latest statistics suggest that the European economy is beginning its second quarter with the strongest growth over the past three years. Companies are reporting an increase in orders, while simultaneously hiring new staff. However, this trend needs to be confirmed, as there are still too many unresolved issues in the euro zone. One of them is very low inflation.
The update by the European Commission once again worsened the inflation forecast for this year. In November the officials in Brussels expected growth rates at 1.5% for the current year, it was subsequently revised to 1%. Now the forecast is lowered to 0.8%, which will certainly spur conversations about risks of deflation. On the other hand, the forecast for GDP growth this year remained the same - at the level of 1.2%.
In France, the government still declares a decline to the European norm of 3% of GDP in 2015, but the European Commission expects if everything in Paris will go on as usual, then next year the deficit will be 3.4%. To achieve this goal, they may have to go for new spending cuts, which could undermine the already weak economic performance of the Fifth Republic.
I continue to hold buy deals. Positive data on the Spanish economy have pushed the market to break through its maximum. Additional positive news for the bulls became the strong data on the European retail market. Instead of the expected decline the index rose by 0.3%. Most likely, after some correction, the market will continue to act on the news by rising prices.
RoboForex Analytical Department
The leader in growth remains the German economy; however the move to pre-crisis growth rates (at least in terms of PMI) in Spain, once a problematic economy, is a serious positive note for the “bulls”. With such statistics, the outcome of the next meeting of the ECB is practically predetermined. The likelihood that with such positive data, Mario Draghi will change something in the monetary policy, tends to zero.
All of the latest statistics suggest that the European economy is beginning its second quarter with the strongest growth over the past three years. Companies are reporting an increase in orders, while simultaneously hiring new staff. However, this trend needs to be confirmed, as there are still too many unresolved issues in the euro zone. One of them is very low inflation.
The update by the European Commission once again worsened the inflation forecast for this year. In November the officials in Brussels expected growth rates at 1.5% for the current year, it was subsequently revised to 1%. Now the forecast is lowered to 0.8%, which will certainly spur conversations about risks of deflation. On the other hand, the forecast for GDP growth this year remained the same - at the level of 1.2%.
In France, the government still declares a decline to the European norm of 3% of GDP in 2015, but the European Commission expects if everything in Paris will go on as usual, then next year the deficit will be 3.4%. To achieve this goal, they may have to go for new spending cuts, which could undermine the already weak economic performance of the Fifth Republic.
I continue to hold buy deals. Positive data on the Spanish economy have pushed the market to break through its maximum. Additional positive news for the bulls became the strong data on the European retail market. Instead of the expected decline the index rose by 0.3%. Most likely, after some correction, the market will continue to act on the news by rising prices.
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.