Fundamental Headlines
• Hypo RE Needs More Capital – Wall Street Journal
• Crist Uses His Old Party as a New Foil – Wall Street Journal
• Stocks Rise Amid Conflicting Signals - Financial Times
• Spain, Ireland, Greece Sell Debt as Demand Increases; Hungary Falls Short - Bloomberg
• Bailed-Out Banks Double LBO Underwriting to Jump-Start European Recovery - Bloomberg
EUR/USD: Producer prices in the 16 member euro area rose 0.6 percent in June after climbing 0.3 percent the previous month to exceed economists’ expectations for a 0.2 percent rise. Excluding energy, producer prices advanced 0.2 percent. Today’s reading bodes well for Europe’s largest economy as the increase in producer prices suggests that Germany’s economic recovery has provided support to the pricing power of producers. At the same time, annualized prices jumped 1.7 percent, the German Federal Statistics Office in Wiesbaden said today. Going forward, producer prices may weaken during the second half of the year as the German economy may slip back into a mild recession as the government scales back stimulus measures. Meanwhile, Spain sold 4.25 billion euros of 12 month bills at a yield of 2.22 percent, and went onto sell 1.72 billion euros of 18 month bills at 2.33 percent. In turn, this lead Spanish 10 year bonds to fall 3 basis points to 4.37 percent. Taking a look at the news wire overnight, European Central Bank Governing Council member, Ewald Nowotny stated that he sees no double-dip scenario for the euro region, and went onto sad that stress tests are strict enough, and doubts are unfounded. To discuss this and other topics, please visit the EUR/USD forum.
GBPUSD: Public finances in the U.K. advanced larger than expected as figures rose to 20.9 billion in June from a upward revision of 14.1 billion the previous month. Public sector net borrowing jumped to 14.5 billion versus economists’ forecasts of 13.0 billion, the National Statistics in London said today. Today’s announcement does not bode well for Great Britain as figures undermines Chancellor of the Exchequer George Osborne’s ability to cut the nation’s largest shortfall since World War II. Meanwhile, CBI business optimism for the month of July plunged to 10 from 24 the month prior. The disappointing reading comes on the back of recent tax increases imposed on businesses by the government while companies continue to face major headwinds with regards to tight credit conditions. At the same time, consumers remain reluctant to spend as they fear looming public sector job cuts. Indeed, the Bank of England has left their benchmark interest rate unchanged at 0.50 percent, and its asset purchase program at 200 billion as the recovery fails to gain momentum. Looking ahead, the Bank of England minutes are scheduled to be released tomorrow. If policy member Andrew Sentance continues to vote for a 25 basis point rate, and receives any support from other members, we may see the British pound rebound off of the 20 day SMA. To discuss this and other topics, please visit the GBP/USD forum.
Related Articles: Markets Await ECB Stress Tests Results
Written by Michael Wright, Currency Analyst
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Michael Wright is the author of FX Headlines, Fundamentals vs. Technical’s, Weekly Spotlight, and Forex Trading Weekly Forecast
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