Euro News

Euro zone price discounting drives growth in activity

By Jonathan Cable

LONDON (Reuters) – Price discounting drove growth in all of the euro zone’s major economies in March, helping business activity increase at its fastest rate for nearly a year, a survey showed on Tuesday.

New orders came in at their fastest rate since May 2011 and the survey found that companies have now been cutting prices for three years, although not as sharply in March as before.

Nevertheless, the Markit survey provided some welcome news for the European Central Bank (ECB) just weeks after it embarked on a trillion-euro asset-purchase program.

The private sector in Germany, Europe’s largest economy, grew at its fastest pace in eight months and although it also increased in France, the pace of expansion slowed.

Italy’s service industry returned to growth, fuelling hopes of an economic recovery there after years of on-off recession, and Spain’s expanded at its fastest pace since August.

“France is lagging behind a little bit but the others are doing pretty well. It just shows that quantitative easing was working even before the ECB bought a single bond,” Soctiabank’s Alan Clarke said.

“It’s vindicating the ECB for what it is doing.”

Official data showed euro zone consumer prices fell again in March as expected but that the decline was the smallest this year. Industrial producer prices declined by less than expected in February from a year earlier.

“Encouragingly for the ECB, there was further evidence in the services survey that deflationary tendencies are easing in the euro zone,” IHS Global Insight’s Howard Archer said.

Markit’s final March Composite Purchasing Managers’ Index (PMI), seen as a good indicator of growth, stood at 54.0, a touch below the preliminary estimate of 54.1 but well ahead of February’s 53.3. A reading above 50 implies growth.

The financial information firm said the PMIs pointed to first quarter growth of 0.3 percent, slightly less than the 0.4 percent predicted in a Reuters poll taken last month. [ECILT/EU]

Price-cutting also helped drive up service industry activity at its fastest pace in eight months. The March services PMI rose to 54.2 from 53.7, just below the flash 54.3 estimate.

With recovery gathering steam and confidence growing because of the ECB’s QE program, service companies were at their most optimistic since May 2011. The business expectations sub-index came in at 64.8 compared with February’s 64.1.

Sentix research group’s index tracking morale among investors and analysts in the euro zone climbed to its highest level since August 2007 this month as they took heart from the European Central Bank’s bond-buying program.

(Editing by Louise Ireland)

Euro zone business growth accelerates as new orders pour in

By Jonathan Cable

LONDON, (Reuters) – Euro zone business activity accelerated in March at its fastest pace for nearly a year as customers took advantage of ongoing price discounting to place new orders at a rate not seen since mid-2011, a survey found.

The upbeat survey will provide welcome news for the European Central Bank just weeks after it embarked on a trillion-euro asset-purchase programme to try and spur growth and inflation.

Markit’s final March Composite Purchasing Managers’ Index (PMI), seen as a good indicator of growth, stood at 54.0, a touch below the preliminary estimate of 54.1 but well ahead of February’s 53.3. A reading above 50 implies growth.

“The PMIs are indicating somewhat sluggish GDP growth of 0.3 percent for the first quarter. However, the important message from the survey data is that the pace of expansion looks set to gather pace in coming months,” said Chris Williamson, Markit’s chief economist.

Markit’s growth projection is slightly less than the 0.4 percent predicted in a Reuters poll taken last month.

A sub-index measuring new orders leapt to 54.1 from 52.5, its highest since May 2011. That suggests a healthier outlook although the survey also showed companies have now been cutting prices for three years, although not as sharply in March.

Euro zone consumer prices fell again in March, as expected, but the decline was the smallest this year.

That price-cutting helped drive service industry activity up at its fastest pace in eight months. The March service sector PMI rose to 54.2 from 53.7, just below the flash 54.3 estimate.

With the recovery gathering steam and confidence growing because of the ECB’s QE programme, service companies were at their most optimistic since May 2011. The business expectations sub-index came in at 64.8 compared with February’s 64.1.

“With the ECB’s policy of quantitative easing also set to provide a boost to the nascent recovery in coming months, the economic outlook is therefore brightening as we expect to see more upward revisions to growth forecasts for the year,” Williamson said.

Shekel strengthens further against dollar

The shekel has strengthened sharply against the US dollar following the disappointing jobs figures released in the US on Friday. The representative shekel-dollar rate was set 0.45% lower today, in comparison with Thursday’s rate (the last time representative rates were set before the start of the Passover holiday), at NIS 3.956/$ , and the representative shekel-euro rate was set 0.02% lower, at NIS 4.2775/. Following the setting of the representative rates, the shekel continued to strengthen against the dollar, and the shekel-dollar exchange rate is currently a further 1.2% down, at NIS 3.9102/$ . Against the euro, the shekel is currently weaker by 0.83%, at NIS 4.313/.

FXCM Israel says in its market review this morning, “The shekel-dollar rate is falling in response to Friday’s disappointing employment figures from the US. The figures are the worst since 2013, arousing fears that the US economy is losing momentum, and cooling expectations of an interest rate hike in the US. If we see a continued decline in the next few months in the rate of creation of new jobs in the US, the Federal Reserve will have to defer its planned interest rate hike. Even in its most hawkish statements, the Federal Reserve has stressed that any interest rate rise depends on consistent improvement in the labor market.

“The disappointing jobs figure could be a signal for a sharp correction both in share indices and in the dollar on world markets. The shekel-dollar pair is now close to NIS 3.9/$ . A fall below this level could accelerate towards NIS 3.87/$ , and if this happens it is certainly conceivable that the Bank of Israel will intervene in trading in an attempt stem the decline.”

Published by Globes [online], Israel business news – www.globes-online.com – on April 6, 2015

Copyright of Globes Publisher Itonut (1983) Ltd. 2015

Euro Rises Fourth Day as Greek Officials Promise IMF Payment

The euro advanced for a fourth day after Greece pledged to make a payment to the International Monetary Fund this week.

The shared currency climbed versus most of its major counterparts after Greece’s Finance Minister Yanis Varoufakis reiterated that the country will make the payment of about 450 million euros ($ 494 million) due April 9. The dollar slumped as Federal Reserve Bank of New York President William C. Dudley said the pace of interest-rate increases is likely to be “shallow” once the central bank starts tightening.

“We’ve had Greek headlines for three months now and I think it’s contributed to intraday volatility,” Vassili Serebriakov, a New York-based foreign-exchange strategist at BNP Paribas SA, said in a phone interview. “The most interesting question for me this session is whether the euro can hold above $ 1.10. This is a level where we’ve failed repeatedly and, in our view, it suggests an underlying demand from European investors to sell the euro.”

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The euro advanced 0.5 percent to $ 1.1025 at 9:20 a.m. in New York, extending its longest streak of gains in 11 months.

The common currency rose 0.5 percent to 131.156 yen. The yen was little changed at 118.96 per dollar, while the Bloomberg Dollar Spot Index dropped 0.3 percent to 1,179.24.

Global Talks

Greece and euro-area authorities are in negotiations about a package of measures proposed by the government to repair its economy, a condition for the release of bailout funds.

Varoufakis met IMF Managing Director Christine Lagarde in Washington and is scheduled to meet U.S. officials on Monday. “The country will pay the IMF on April 9,” Greece’s Alternate Finance Minister Dimitris Mardas said in an interview on Mega TV on April 4.

“The market’s pretty much siding with the view that Greece will make that payment,” said Prashant Newnaha, a rates strategist at TD Securities Inc. in Singapore. “If they do make that payment, that’s also going to be a positive for the euro.”

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The euro has tumbled 5.5 percent this year, the worse performer among a basket of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar has gained 4.9 percent and the yen advanced 5.7 percent in the period, the indexes show.

Net bearish positions on the euro rose to 226,560 contracts in the week to March 31, the most since the currency’s inception, according to data from the Washington-based Commodity Futures Trading Commission.

More from Bloomberg.com: Dudley: Rate Increases Will Be Data Dependent

The common currency has slumped amid unprecedented easing from the European Central Bank as the U.S. moves toward raising borrowing costs for the first time since 2006.

The timing of interest-rate increases is still uncertain and will depend on data, New York Fed President Dudley said in a speech Monday in Newark, New Jersey. Jobs data trailed forecasts on April 3, casting doubt on the strength of the U.S. recovery.

“It will be important to monitor developments to determine whether the softness in the March labor market report evident on Friday foreshadows a more substantial slowing in the labor market than I currently anticipate,” he said.

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Currencies: Dollar extends drop vs. euro after payrolls-inspired selloff

The euro edged higher versus the dollar Monday, extending gains scored Friday after weaker-than-expected nonfarm payrolls data saw investors push back expectations for a rate hike by the Federal Reserve.

The euro EURUSD, +0.55%  traded at $ 1.0991, up from $ 1.0972 in North American trade late Friday. The U.S. currency USDJPY, -0.04%  was up versus the Japanese yen at ¥119.07 compared with ¥118.93 late Friday in New York.

The ICE dollar index DXY, -0.16% a measure of the U.S. currency against a basket of six major rivals, was up 0.1% at 96.651.

Trading activity in Asia and Europe was subdued, with many traders still away from their desks for the Easter vacation and other public holidays. The dollar found downside support against the yen to stabilize above ¥119 following Friday’s losses.

Japanese importers and institutional investors were among the investors eager to buy the greenback on dips. Market participants also noted some indirect support for the dollar against the yen via selling of the Japanese currency against the euro.

Friday’s tumble in the dollar was the biggest fall in almost two weeks following U.S. labor data for March that showed nonfarm payrolls grew by 126,000, about half the increase forecast by economists in a Wall Street Journal survey.

Read: Poor jobs report blurs economic outlook

“There is speculation that the consensus about a U.S. rate increase is now being pushed back to December from September,” a change in views that could lower the dollar in currency trade, said Mizuho Securities FX strategist Kenji Yoshii.

Disappointing March jobs report: Will the Fed move?

The March jobs picture and how it relates to the broader U.S. economy.

Even so, Yoshii said he didn’t “get the impression that the USD is falling very much.” He added that larger falls in the dollar are likely being prevented by a cycle in which a weaker dollar causes U.S. stocks to rise, suggesting greater buoyancy in risk-taking sentiment that results in selling away from the perceived safety of the yen and a stronger dollar.

Read: Don’t fight the Fed; invest with it

IG Securities market analyst Juniichi Ishikawa said in a note that the dollar could fall below ¥118 if U.S. stocks soften this week. Mr. Ishikawa said the reaction of U.S. shares to Friday’s downbeat labor data could push the dollar down against the yen later Monday if the shares fall. U.S. indicators, including today’s ISM non-manufacturing business index, and U.S. corporate earnings will also be under the spotlight this week.

“We are going to have a week of closely monitoring the after effects of the lackluster U.S. data and the impact of (U.S.) quarterly earnings,” he said.

The WSJ Dollar Index BUXX, -0.35% a measure of the dollar against a basket of major currencies, was donw 0.1% at 86.54.

Shekel-dollar rate sinks

The local foreign exchange market has given its first reaction this morning to last week’s disappointing US jobs report. The The shekel-dollar exchange rate is currently down 0.9% in comparison with Thursday’s representative rate (the last time representative rates were set before the start of the Passover holiday), at NIS 3.9203/$ , while the shekel-euro rate is up 0.59%, at NIS 4.3026/.

Just 126 thousand new jobs were added to the US labor market in March. This compares with a forecast of 245 thousand, and comes after 295 thousand jobs were added in February. The US unemployment rate remains at 5.5%, as expected.

FXCM Israel says in its market review this morning, “The shekel-dollar rate is falling in response to Friday’s disappointing employment figures from the US. The figures are the worst since 2013, arousing fears that the US economy is losing momentum, and cooling expectations of an interest rate hike in the US. If we see a continued decline in the next few months in the rate of creation of new jobs in the US, the Federal Reserve will have to defer its planned interest rate hike. Even in its most hawkish statements, the Federal Reserve has stressed that any interest rate rise depends on consistent improvement in the labor market.

“The disappointing jobs figure could be a signal for a sharp correction both in share indices and in the dollar on world markets. The shekel-dollar pair is now close to NIS 3.9/$ . A fall below this level could accelerate towards NIS 3.87/$ , and if this happens it is certainly conceivable that the Bank of Israel will intervene in trading in an attempt stem the decline.”

Published by Globes [online], Israel business news – www.globes-online.com – on April 6, 2015

Copyright of Globes Publisher Itonut (1983) Ltd. 2015

Euro weakness sparks analyst clash over currency war

Paris (AFP) – The euro’s slide against the dollar has reignited talk of a “currency war”, with analysts in opposing camps over whether or not countries are consciously playing with their exchange rates.

War language is no stranger to modern monetary policy.

The massive bond buying programmes, or quantitative easing (QE), that central banks have used in response to the financial and economic crises that have rocked the global economy since 2008 are often referred to as a bazooka.

After lowering interest rates, sometimes to zero or even into negative territory, major central banks turned to buying government and corporate bonds to stimulate the economy.

First tried by Japan in 2001 to combat deflation, the US Federal Reserve began using it in 2008 to respond to the financial market crisis and pull the US economy out of recession.

Japan used QE with more success in 2013 after Shinzo Abe came to power, and the European Central Bank joined the party in March.

– Monetary policy bazooka –

But central banks fired this bazooka as governments had little they could do.

“We are really in a situation where monetary policy has substituted for budgetary policy” as “the governments don’t have any more budgetary margin for maneouvre,” said Saxo Banque economist Christopher Dembik.

And the bazooka wasn’t directly aimed at exchange rates.

The bond purchases inject money into the economy, thus addressing any concerns about market liquidity. To the extent the funds result in new investments in the real economy it stimulates growth, another aim of QE policies.

But some funds end up leaving the country as investors seek better returns elsewhere. This pushes the value of the currency down, which is also not an unwelcome effect for policymakers as this favours more exports of goods and services and thus growth.

“The currency weapon is rarely the official objective,” said Patrick Jacq, a bonds specialist at BNP Paribas bank.

Led by Brazil, developing countries charged that the US QE programme was a first shot in a currency war because their economies suffered as exports slumped thanks to the weak dollar.

Those complaints were brushed aside with commitments by the leading economies to “market-determined exchange rates”.

But public comments from elected officials about currency values often muddy the waters about policy objectives, even if central banks in most major economies are independent.

Lowering a currency’s value may not be the stated policy objective “but they are thinking it so loudly all the world hears it,” said Rene Desfossez, a bonds specialist at Natixis investment bank.

The reason is clear as “the exchange rate is one of the principle levers on which they can use to make monetary policy as favourable as possible for economic recovery”.

A weak currency can provide a boost to exports, and thus contribute to a wider economic recovery if companies raise wages and create new jobs.

– Policy free for all –

And UniCredit’s global chief economist, Erik Nielsen, observed recently that days of “gentlemanly” cooperation between central banks is long gone.

“I am not in the ‘currency war’ camp, but it is important to note that the world’s leading central bankers are now making it explicitly clear that they run monetary policy for their own country only,” he said in a note to clients.

“And while the currency is not an explicit objective in their policy set-up, the FX is seen — and explicitly referred to — as an integral part of creating the desired financial conditions for the domestic economies.”

More countries have been joining on the easing bandwagon, either on their own initiative or in response to others.

The Organisation for Economic Cooperation and Development noted recently that monetary policy in countries accounting for roughly half of global output had been eased in the past few months.

– ‘Not necessarily warfare’ –

But is it a currency war?

Editors at Bloomberg recently wrote that “this isn’t necessarily warfare”.

The eurozone, Japan and China all have ample justification for monetary stimulus, they noted.

One way of uncovering unfair currency manipulation, Bloomberg editors said, is to look at foreign reserves, which should increase if a country is deliberately buying foreign currency to keep the value of its currency low.

But no major country has been massively hoarding foreign reserves, according to Bloomberg data.

The massive swings in currencies in recent months — the dollar has appreciated by a quarter against a basket of major currencies since August — may be due more to monetary and economic dissonance.

While the eurozone and much of the rest of the world are easing monetary policy, the United States is on the cusp of raising interest rates from the zero level where they have been for more than six years.

The prospect of higher returns on US bonds caused a brief stampede out of emerging markets last year, and with much of eurozone debt now providing little if no return, the euro has been slumping against the greenback.

“As we have said for over a year now, the divergence in central bank policies is crucial to where these currencies move now,” said Greg Smith, an analyst at currency trading firm World First.

Currencies: Euro climbs against dollar for 3rd straight week

NEW YORK (MarketWatch)—The euro cemented its third straight week of gains against the dollar Friday after a surprisingly weak nonfarm payrolls report.

The report helped the euro climb 1% against the dollar in light trading. Stock markets in the U.S. and Europe were closed for Good Friday.

Read: Light volume doesn’t skew currency rates on Good Friday

The Department of Labor said the U.S. economy added 126,000 jobs in March, missing a consensus forecast for 243,000 from a MarketWatch poll of analysts.

The data likely took a June Federal-funds rate increase off the table, and even cast doubt on the a September hike, said Matt Weller, senior technical analyst at Forex.com.

“Honestly I would describe it as abysmal all around,” Weller said of the report.

Read: U.S. jobs growth in March slumps to 15-month low

In a note to clients released after the data, analysts at BTIG said a recent string of weak U.S. economic data, most recently the March ISM manufacturing index reading and the ADP jobs number released Wednesday, fostered the expectation that the number would likely miss official forecasts.

“While the actual number was much less than expected (and downward revisions to prior months reduced job growth by over 60K), a weak number is not a total surprise given these “warnings,” the analysts said.

The euro was EURUSD, +0.90%  trading at $ 1.0977, off its session high of $ 1.1027. It traded at $ 1.0880 late Thursday.

Average hourly wages rose by 0.3%, which several analysts said was the report’s only positive.

The dollar USDJPY, -0.63%  was at ¥118.96, compared with ¥119.70 late Thursday in New York.

The WSJ Dollar Index BUXX, -0.71% a measure of the dollar against a basket of major currencies, was down 1% at 86.35. The ICE U.S. Dollar Index DXY, -0.81% a measure of the buck’s strength against six rivals, rose 0.2% to 96.7530.

On Tuesday, the ICE index recorded a 9% increase for the first quarter of 2015, its strongest showing since the third quarter of 2008, as the dollar gained ground against the euro, but retreated slightly against the yen.

Weak euro has NI tourism impact

Euros
A weak euro is causing a degree of trepidation among some in the Northern Ireland hospitality sector

Sterling’s strength against the euro is not good news for Northern Ireland tourism as it tries to make headway in two of its toughest markets.

Continental Europe and the Republic of Ireland in particular have been a struggle, (based on the last annual statistics available, for 2013).

When you factor in a weak euro and there is a degree of trepidation over what the next few months may hold in an industry seen as increasingly important to the Northern Ireland economy.

“My worry is months down the line it definitely will impact,” said Bob McCoubrey, a restaurant owner.

Like others in hospitality, he points out there is a lower VAT rate for tourism in the Republic of Ireland (9%) compared to Northern Ireland (20%).

Add in a weak euro and suddenly, he says, “we are going to seem to be a very expensive location”.

On top of potentially fewer Eurozone visitors, more Northern Ireland people are likely to be tempted by breaks on the other side of the Irish border.

‘Fighting hard’

“It is a double whammy,” says Terry McCartney, who runs a hotel business in County Fermanagh and sits on the board of Tourism NI.

“We are fighting hard to maintain the level of business we have, but there is no doubt it is difficult,” he said.

Bob McCoubrey
Bob McCoubrey says about 50% of lunchtime diners in his restaurant are from the Far East

The situation also arrives at a time when Tourism NI has had its advertising budgets cut.

It is banking on major events like the forthcoming Irish Open at Royal County Down in Newcastle to provide an influx of visitors and spending power.

Figures from Tourism NI reveal about one in five tickets sales has been to residents in the Republic of Ireland.

It is not all gloom.

In Bob McCoubrey’s restaurant in Belfast, about 50% of lunchtime diners are from the Far East.

“It is not impacting on Asian or American visitors,” he said.

The Northern Ireland tourism product now stretches much further afield, and does not have to over-rely on visitors nearer home.