Stubborn statistics
23.06.2014
Fundamental analysis 23.06.2014
Recovery of the European economy is fading. For the past several months the French PMI indicators continue to stagnate, and this time the industrial and service PMI slipped to 47.8 and 48.2 respectively, which means a reduction in the economy of the Fifth Republic on almost all fronts. Moreover, although the German figures are above the cherished mark of 50, they still maintain a downward trend.
Needless to say that on this background the pan-European statistics on the PMI were also worse than last month’s data as well as the expectations of most economists. Earlier the IMF already had doubt about the further course of the recovery in the euro area, recommending the ECB to take more substantial support measures. And after today's statistics the question about the adequacy of the measures taken earlier by the ECB is gaining weight.
This weekend in an interview with De Telegraaf Mario Draghi noted that rates could remain at record low levels during the next two and a half years. If we compare this with the position of the Fed rhetoric, where the cycle of rate hikes could start in the next year, it can be considered that the Eurodollar is confirming a new bearish trend. Corrections, of course, are possible, but the direction seems to have been set.
Equally interesting was the comment from the Vice-President of the ECB Victor Constancio, who pointed out the full-scale purchases of securities, as the next possible step of the ECB, in the case of worsening inflation forecasts. Actually, even now these forecasts do not shine with optimism. For the current year the ECB expects the inflation to be at 0.7%, not much more next year - 1.1%, and only in 2016, inflation is expected to be at 1.4%.
Consequently, in the coming years is not even worth expecting for the index to return to the target level of the regulator of 2%. As practice shows, the ECB regularly reviews the forecasts for the worse, but it is unclear how negative the revision of the expectations for inflation has to be to lead into a full European quantitative easing.
At the publishing of data on the PMI I overturned into short positions, because it is difficult to imagine a growth of the monetary pair in the current environment. In the evening we will see the data on the U.S. real estate market, which is expected to be better than last month’s. Therefore, if no surprises arise, the Eurodollar will continue to move to the minimum levels.
RoboForex research department Stanislav Koval
Recovery of the European economy is fading. For the past several months the French PMI indicators continue to stagnate, and this time the industrial and service PMI slipped to 47.8 and 48.2 respectively, which means a reduction in the economy of the Fifth Republic on almost all fronts. Moreover, although the German figures are above the cherished mark of 50, they still maintain a downward trend.
Needless to say that on this background the pan-European statistics on the PMI were also worse than last month’s data as well as the expectations of most economists. Earlier the IMF already had doubt about the further course of the recovery in the euro area, recommending the ECB to take more substantial support measures. And after today's statistics the question about the adequacy of the measures taken earlier by the ECB is gaining weight.
This weekend in an interview with De Telegraaf Mario Draghi noted that rates could remain at record low levels during the next two and a half years. If we compare this with the position of the Fed rhetoric, where the cycle of rate hikes could start in the next year, it can be considered that the Eurodollar is confirming a new bearish trend. Corrections, of course, are possible, but the direction seems to have been set.
Equally interesting was the comment from the Vice-President of the ECB Victor Constancio, who pointed out the full-scale purchases of securities, as the next possible step of the ECB, in the case of worsening inflation forecasts. Actually, even now these forecasts do not shine with optimism. For the current year the ECB expects the inflation to be at 0.7%, not much more next year - 1.1%, and only in 2016, inflation is expected to be at 1.4%.
Consequently, in the coming years is not even worth expecting for the index to return to the target level of the regulator of 2%. As practice shows, the ECB regularly reviews the forecasts for the worse, but it is unclear how negative the revision of the expectations for inflation has to be to lead into a full European quantitative easing.
At the publishing of data on the PMI I overturned into short positions, because it is difficult to imagine a growth of the monetary pair in the current environment. In the evening we will see the data on the U.S. real estate market, which is expected to be better than last month’s. Therefore, if no surprises arise, the Eurodollar will continue to move to the minimum levels.
RoboForex research department Stanislav Koval
Attention!
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.