Euro Halts Three-Day Decline as Economy Emerges From Recession, British Pound Rally Supported by 20-Day SMA
>> Nov 13, 2009
The euro advanced to a high of 1.4903 during the overnight trade, but failed to hold ground and slipped back to the 20-Day SMA (1.4885) as economic activity in the region expanded less-than-expected in the third quarter.
Talking Points
• Japanese Yen: Finance Minister Fujii Says Economy Remains ‘Very Unstable’
• Pound: Rally Remains Supported By 20-Day SMA
• Euro: 3Q GDP Expands Less-Than-Expected
• US Dollar: Trade Balance, U. of Michigan Confidence on Tap
Euro Halts Three-Day Decline as Economy Emerges From Recession, British Pound Rally Supported by 20-Day SMA
The euro advanced to a high of 1.4903 during the overnight trade, but failed to hold ground and slipped back to the 20-Day SMA (1.4885) as economic activity in the region expanded less-than-expected in the third quarter. The advanced GDP reading for the Euro-Zone showed the growth rate increased 0.4% from the second quarter amid projections for a 0.5% rise, with the annualized rate tumbling 4.1% from the previous year versus forecasts for a 3.9% drop.
At the same time, Germany’s third quarter GDP expanded 0.7% after rising 0.4% during the three-months through June, while the annualized rate slipped 4.8% from the previous year, which was largely in-line with market expectations. As the Euro-Zone emerges from the worst recession since the post-war period, expectations for higher interest rates in the region may continue to support the rally in the EUR/USD however, economic advisors to the Germany government expects the European Central Bank to scale back its emergency programs before the Governing Council begins to raise borrowing costs throughout the economy. Moreover, the group said that the economic recovery in Germany remains fragile as the expansion in monetary and fiscal policy continues to support economic activity in the region, and went onto say that “abrupt” changes in foreign exchange rates could hamper the prospects for the recovery as global trade conditions remain weak.
The British pound strengthened against the greenback for the second-day to reach a high of 1.6699, and the currency may continue to trend higher throughout the month as the rally remains well supported by the 20-Day SMA (1.6518). Nevertheless, the Financial Times said that Chancellor of the Exchequer Alistair Darling was surprised when Bank of England Governor Mervyn King projected economic activity to expand 4.0% in 2011 during the central bank’s quarter inflation report, and sees a risk that Mr. Darling may hold a lower outlook for future growth than the BoE in the Pre-Budget report due out in the following month. Meanwhile, Financial Services Authority Managing Director of Supervision Jon Pain held a cautious outlook for the U.K. mortgage market and said that credit lending should not be influenced by a handful of large financial institutions, and said that “new entrants into the mortgage market should be encouraged if they have a sustainable business model.”
The greenback weakened across the board following the rise in risk appetite, and the reserve currency may face increased selling pressures going into the North American session as equity futures foreshadow a higher open for the U.S. market. Nevertheless, the economic docket is expected to reinforce an improved outlook for private spending as economists forecast the U. of Michigan confidence survey to increase to 71.0 in November from 70.6 in the previous month. At the same time, import price are forecasted to rise 1.0% in October, with the annualized rate projected to fall 5.5% from the previous year, while the trade deficit is anticipated to widen to $31.8B from $30.7B in August.
Will The EUR/USD Maintain Its Rally?
Related Articles:
Currency Markets Inch Towards a Stronger US Dollar
To discuss this report contact David Song, Currency Analyst: dsong@fxcm.com
• Japanese Yen: Finance Minister Fujii Says Economy Remains ‘Very Unstable’
• Pound: Rally Remains Supported By 20-Day SMA
• Euro: 3Q GDP Expands Less-Than-Expected
• US Dollar: Trade Balance, U. of Michigan Confidence on Tap
Euro Halts Three-Day Decline as Economy Emerges From Recession, British Pound Rally Supported by 20-Day SMA
The euro advanced to a high of 1.4903 during the overnight trade, but failed to hold ground and slipped back to the 20-Day SMA (1.4885) as economic activity in the region expanded less-than-expected in the third quarter. The advanced GDP reading for the Euro-Zone showed the growth rate increased 0.4% from the second quarter amid projections for a 0.5% rise, with the annualized rate tumbling 4.1% from the previous year versus forecasts for a 3.9% drop.
At the same time, Germany’s third quarter GDP expanded 0.7% after rising 0.4% during the three-months through June, while the annualized rate slipped 4.8% from the previous year, which was largely in-line with market expectations. As the Euro-Zone emerges from the worst recession since the post-war period, expectations for higher interest rates in the region may continue to support the rally in the EUR/USD however, economic advisors to the Germany government expects the European Central Bank to scale back its emergency programs before the Governing Council begins to raise borrowing costs throughout the economy. Moreover, the group said that the economic recovery in Germany remains fragile as the expansion in monetary and fiscal policy continues to support economic activity in the region, and went onto say that “abrupt” changes in foreign exchange rates could hamper the prospects for the recovery as global trade conditions remain weak.
The British pound strengthened against the greenback for the second-day to reach a high of 1.6699, and the currency may continue to trend higher throughout the month as the rally remains well supported by the 20-Day SMA (1.6518). Nevertheless, the Financial Times said that Chancellor of the Exchequer Alistair Darling was surprised when Bank of England Governor Mervyn King projected economic activity to expand 4.0% in 2011 during the central bank’s quarter inflation report, and sees a risk that Mr. Darling may hold a lower outlook for future growth than the BoE in the Pre-Budget report due out in the following month. Meanwhile, Financial Services Authority Managing Director of Supervision Jon Pain held a cautious outlook for the U.K. mortgage market and said that credit lending should not be influenced by a handful of large financial institutions, and said that “new entrants into the mortgage market should be encouraged if they have a sustainable business model.”
The greenback weakened across the board following the rise in risk appetite, and the reserve currency may face increased selling pressures going into the North American session as equity futures foreshadow a higher open for the U.S. market. Nevertheless, the economic docket is expected to reinforce an improved outlook for private spending as economists forecast the U. of Michigan confidence survey to increase to 71.0 in November from 70.6 in the previous month. At the same time, import price are forecasted to rise 1.0% in October, with the annualized rate projected to fall 5.5% from the previous year, while the trade deficit is anticipated to widen to $31.8B from $30.7B in August.
Will The EUR/USD Maintain Its Rally?
Related Articles:
Currency Markets Inch Towards a Stronger US Dollar
To discuss this report contact David Song, Currency Analyst: dsong@fxcm.com
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