The first step toward a new recession. Fundamental analysis for 15.05.2014
15.05.2014
The economic recovery of the euro zone is slowing. The preliminary data on the pan-European GDP for the first quarter shows very weak growth of just 0.2% (with expectations of 0.4%). In fact, the statistics were only pulled up by strong data for Germany, where the economy was able to gain 0.8%, which was a pleasant surprise for the politicians in Berlin. In other countries of the euro zone the situation is close to a new recession.
The data for the French economy, which is the second largest in the euro zone, came out at zero, not showing any growth or decline. Italy's GDP sank by 0.1%, which significantly complicates the implementation of an additional package to reduce costs. Consequently, there is a fairly high probability that Rome will once again frustrate all the deadlines and will lead to the budget deficit failing to reach the European norm of 3% of GDP.
Among the outsiders was unexpectedly Netherlands, where the economy slipped by 1.4%, due to a sharp reduction of industrial production and retail sales by 3.8% and 2.2%, respectively. Earlier on Amsterdam was strongly advocating the idea of spending cuts in euro zone countries, and even showed by example how to dramatically "cut" the budget lines. And here we see statistics that are even worse than in Greece.
In April an announcement was made in Paris about the upcoming reduction of the tax burden on businesses in the amount of € 30 billion over the next three years, due to the government reasoning that it should somehow compensate for the upcoming new wave of government spending cuts of € 50 billion. Now the pressure on the socialist government will only grow, given that they won the election just on slogans of the termination of a rampant economy.
Revised data on inflation was also published, but no revision was made and the April stats are fixed at 0 7%. Furthermore, an additional driver for reduction of the Eurodollar was a statement by a member of the executive committee of the ECB Peter Praeta that out of the possible measures the regulator can present at the June meeting, in the case of worsening inflation, is an introduction of a negative deposit rate.
I continue to hold the deal to sell. The latest European statistics allow the Eurodollar to decline further. Later today, a large block of American statistics is expected, and if there will be no surprises, the pair will remain in a downtrend. However, to reduce the risks in transactions I adjusted the footing to the local maximum.
RoboForex Analytical Department
The data for the French economy, which is the second largest in the euro zone, came out at zero, not showing any growth or decline. Italy's GDP sank by 0.1%, which significantly complicates the implementation of an additional package to reduce costs. Consequently, there is a fairly high probability that Rome will once again frustrate all the deadlines and will lead to the budget deficit failing to reach the European norm of 3% of GDP.
Among the outsiders was unexpectedly Netherlands, where the economy slipped by 1.4%, due to a sharp reduction of industrial production and retail sales by 3.8% and 2.2%, respectively. Earlier on Amsterdam was strongly advocating the idea of spending cuts in euro zone countries, and even showed by example how to dramatically "cut" the budget lines. And here we see statistics that are even worse than in Greece.
In April an announcement was made in Paris about the upcoming reduction of the tax burden on businesses in the amount of € 30 billion over the next three years, due to the government reasoning that it should somehow compensate for the upcoming new wave of government spending cuts of € 50 billion. Now the pressure on the socialist government will only grow, given that they won the election just on slogans of the termination of a rampant economy.
Revised data on inflation was also published, but no revision was made and the April stats are fixed at 0 7%. Furthermore, an additional driver for reduction of the Eurodollar was a statement by a member of the executive committee of the ECB Peter Praeta that out of the possible measures the regulator can present at the June meeting, in the case of worsening inflation, is an introduction of a negative deposit rate.
I continue to hold the deal to sell. The latest European statistics allow the Eurodollar to decline further. Later today, a large block of American statistics is expected, and if there will be no surprises, the pair will remain in a downtrend. However, to reduce the risks in transactions I adjusted the footing to the local maximum.
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.