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Market Review July 8, 2014

July 8, 2014  

The week didn’t start too well for the Euro. Statistics show the fall of manufacturing in Germany by 1.8% while the 0.3% growth has been expected. It’s the biggest downfall of German economy in more than 2 years. More over last month data were revised to worse numbers. As a result German GDP growth in the second quarter is likely to exceed 0.1%. 

If we take to account that German economy provides around 30% of Overall European GDP, then with such figures we are going to see weaker data of the Euro zone. Stagnating Spanish industrial production, that has dropped to 0.7%, contributes to the complicated situation.  If we add a problematic French economy gradually sliding to new recession, then the general picture will become quite grim.

It is quite logical that recent data from Europe are not likely to let inflation show more or less significant rise. As a reminder earlier PPI  has been in the red zone and retail PMI remains on zero. At that June inflation (yearly number) has remained on 0, what reflects growth absence of retail prices. June inflation ( annual count)y is on May level of 0.5% with a goal of the ECB at 2%.

It is worth mentioning that the impulse received in the beginning of the year by German economy and others as well was explained by quite warm winter. The absence of common European colds supported construction sector and other weather dependent fields. As a result spring activity partly has shifted to the beginning of the year, what leads to weak reports now.

In general in the second part of the year German industry will most likely come back to growing again, while things in France are the way too more complicated. Realization of promised by the government of the 5th republic tax incentives is stagnating. As a result Business Climate Index has dropped below long term average numbers, while in Germany a similar index has been coming out above average for a year already.

 

 TECHNICAL ANALYSIS

EUR/USD

In the morning the Euro is more or less in the same level as yesterday.

Most likely the Euro entered the period of consolidation before continuation of bearish trend.

USD/JPY

The pair didn’t get back up to test resistance on the upside. So now it is falling down rapidly. The downward trend extends to as far as 101.25. Until then no strong support is seen anywhere beforehand.

GBP/USD

Apparently the consolidation is over and the outcome of it is a gradual decline. It looks like a slight correction of the bullish trend. Nevertheless it doesn’t change a big picture and the outlook remains bullish anyway.

 

 

 

 

ECONOMIC CALENDAR

1:30     AUD               NAB Business Confidence   

06:00    EUR  German Trade Balance 

07:15    CHF  Retail Sales (YoY) 

07:15    CHF  Swiss CPI (MoM) 

08:30    GBP  Industrial Production (MoM)    

08:30    GBP  Manufacturing Production (MoM)    

12:00    BRL  Brazilian CPI (YoY)      

14:00    GBP  NIESR GDP Estimate         

14:00    USD  JOLTs Job Openings    

17:45    USD  FOMC Member Kocherlakota Speaks