Euro Advances as Greece Announces Additional Measures to Curb Deficit
Posted 03-03-2010 at 10:20 AM by DailyFX
Talking Points
• Japanese Yen: Mixed Against the Major Currencies
• Pound: Service-Based Activity Expands at Fastest Pace Since 2007
• Euro: Retail Spending Contracts in February
• U.S. Dollar: ISM Non-Manufacturing, Fed’s Beige Book on Tap
Euro Advances as Greece Announces Additional Measures to Curb Deficit, British Pound Halts Six-Day Decline
The EUR/USD bounced back during the early European trade and crossed above the 20-Day SMA (1.3632) to reach a high of 1.3665, and the pair is likely to maintain the narrow range carried over from the previous week going into the North American as the European Central Bank is scheduled to announce its rate decision tomorrow at 12:45 GMT. Greek Prime Minister George Papandreou announced that the government will reduce the deficit by another EUR 4.8B by raising taxes, which is expected to yield EUR 2.4B in additional revenue, and will curb the salary for civil servants as policy makers aim to bring down the deficit to 8.7% of GDP from 12.7% by the end of the year.
Meanwhile, the economic docket showed retail spending in Germany held flat in January amid expectations for a 0.6% decline, while the annualized rate tumbled 3.4% from the previous year after contracting a revised 1.8% in the previous month. Moreover, household consumption in the Euro-Zone slipped 0.3% during the same period after rising a revised 0.5% in December, but the ongoing weakness in the labor market may continue to weigh on consumers’ temperament to spend as policy makers continue to see a risk for a protracted recovery. Meanwhile, the final services PMI reading for the euro-region showed service-based activity expanded at a slower pace than initial expected, with the gauge weakening to 51.8 in February from the 52.0 clip seen during the advance reading, while the index slipped from 52.5 in January. Nevertheless, the ECB is widely anticipated to hold the benchmark interest rate at 1.00% this month as the Governing Council expects to see an “uneven” recovery, and subdued inflation may lead the central bank to maintain a dovish outlook for future policy as they maintain their one and only mandate to ensure price stability.
The British Pound halted the six-day decline against the greenback and pushed to a high of 1.5078 as service-based activity expanded at the fastest pace in three-years, and we may see the exchange rate trend higher over the remainder of the week as the daily RSI bounces back from a low of 20. The services PMI reading for February jumped to 58.4 from 54.5 in the previous month to mark the highest reading since January 2007, and economic conditions are likely to improve throughout the year as the expansion in monetary and fiscal policy continues to feed through the real economy. Meanwhile, the Bank of England is widely expected to maintain its currency policy in March as the central bank aims to encourage a sustainable recovery in the U.K., but dovish commentary following the rate decision is likely to weigh on the exchange rate as market participants speculate the MPC to expand its asset purchase program over the coming months.
The greenback tipped lower against most of the majors, with the USD/JPY slipping to a fresh weekly low of 88.45, and the reserve currency could face increased volatility going into the North American as the Fed is scheduled to release its Beige Book Economic report at 19:00 GMT. The central bank is likely to maintain a cautious outlook for the world’s largest economy as a result of the ongoing weakness in the labor market paired with tightening credit conditions, and the report is likely to instill a dovish outlook for future policy as Chairman Ben Bernanke expects inflation to remain subdued over the coming months. Nevertheless, service-based activity in the U.S. is expected to expand at a faster pace in February as market participants forecast the ISM Non-Manufacturing index to rise to 51.0 from 50.5 in the previous month, while the ADP employment report is projected to show a 20K drop in private payrolls.
Will EUR/USD Price Action Continue to Hold Below the 20-Day SMA? Join us in the Forum.
Read more: DailyFX - Euro Advances as Greece Announces Additional Measures to Curb Deficit, British Pound Halts Six-Day Decline
• Japanese Yen: Mixed Against the Major Currencies
• Pound: Service-Based Activity Expands at Fastest Pace Since 2007
• Euro: Retail Spending Contracts in February
• U.S. Dollar: ISM Non-Manufacturing, Fed’s Beige Book on Tap
Euro Advances as Greece Announces Additional Measures to Curb Deficit, British Pound Halts Six-Day Decline
The EUR/USD bounced back during the early European trade and crossed above the 20-Day SMA (1.3632) to reach a high of 1.3665, and the pair is likely to maintain the narrow range carried over from the previous week going into the North American as the European Central Bank is scheduled to announce its rate decision tomorrow at 12:45 GMT. Greek Prime Minister George Papandreou announced that the government will reduce the deficit by another EUR 4.8B by raising taxes, which is expected to yield EUR 2.4B in additional revenue, and will curb the salary for civil servants as policy makers aim to bring down the deficit to 8.7% of GDP from 12.7% by the end of the year.
Meanwhile, the economic docket showed retail spending in Germany held flat in January amid expectations for a 0.6% decline, while the annualized rate tumbled 3.4% from the previous year after contracting a revised 1.8% in the previous month. Moreover, household consumption in the Euro-Zone slipped 0.3% during the same period after rising a revised 0.5% in December, but the ongoing weakness in the labor market may continue to weigh on consumers’ temperament to spend as policy makers continue to see a risk for a protracted recovery. Meanwhile, the final services PMI reading for the euro-region showed service-based activity expanded at a slower pace than initial expected, with the gauge weakening to 51.8 in February from the 52.0 clip seen during the advance reading, while the index slipped from 52.5 in January. Nevertheless, the ECB is widely anticipated to hold the benchmark interest rate at 1.00% this month as the Governing Council expects to see an “uneven” recovery, and subdued inflation may lead the central bank to maintain a dovish outlook for future policy as they maintain their one and only mandate to ensure price stability.
The British Pound halted the six-day decline against the greenback and pushed to a high of 1.5078 as service-based activity expanded at the fastest pace in three-years, and we may see the exchange rate trend higher over the remainder of the week as the daily RSI bounces back from a low of 20. The services PMI reading for February jumped to 58.4 from 54.5 in the previous month to mark the highest reading since January 2007, and economic conditions are likely to improve throughout the year as the expansion in monetary and fiscal policy continues to feed through the real economy. Meanwhile, the Bank of England is widely expected to maintain its currency policy in March as the central bank aims to encourage a sustainable recovery in the U.K., but dovish commentary following the rate decision is likely to weigh on the exchange rate as market participants speculate the MPC to expand its asset purchase program over the coming months.
The greenback tipped lower against most of the majors, with the USD/JPY slipping to a fresh weekly low of 88.45, and the reserve currency could face increased volatility going into the North American as the Fed is scheduled to release its Beige Book Economic report at 19:00 GMT. The central bank is likely to maintain a cautious outlook for the world’s largest economy as a result of the ongoing weakness in the labor market paired with tightening credit conditions, and the report is likely to instill a dovish outlook for future policy as Chairman Ben Bernanke expects inflation to remain subdued over the coming months. Nevertheless, service-based activity in the U.S. is expected to expand at a faster pace in February as market participants forecast the ISM Non-Manufacturing index to rise to 51.0 from 50.5 in the previous month, while the ADP employment report is projected to show a 20K drop in private payrolls.
Will EUR/USD Price Action Continue to Hold Below the 20-Day SMA? Join us in the Forum.
Read more: DailyFX - Euro Advances as Greece Announces Additional Measures to Curb Deficit, British Pound Halts Six-Day Decline
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