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Euro-Area GDP Slips 0.1% In Third Quarter

By  |  Forex  |  Dec 06, 2012 12:48PM GMT  |   Add a Comment
 
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Today’s highlights
Halifax House Price Index (MoM) (GB, 08:00 GMT)

Trade Balance (GB, 09:30 GMT)

GDP (QoQ) (EU, 10:00 GMT)

German Factory Orders (MoM) (Ger, 11:00 GMT)

BOE QE Total + Interest Rate Decision (GB, 12:00 GMT)

Interest Rate Decision (EU, 12:45 GMT)

Building Permits (MoM) (Can, 13:30 GMT)

ECB Press Conference (EU, 13:30 GMT)

Initial Jobless Claims (U.S, 13:30 GMT)

Ivey PMI (Can, 15:00 GMT)

President Barack Obama is hardening his stance in his first post-election confrontation with Republicans, declaring he will make no deal on the country’s fiscal future unless congressional leaders first accept tax-rate increases on top earners.

Companies in Europe are perceived to be the safest compared with their U.S. counterparts in 17 months as risks of a currency breakup diminish while politicians in the world’s biggest economy struggle to cut the nation’s deficit. In addition, Europe is making a comeback in the debt markets as European Central Bank President Mario Draghi pledges to do whatever’s necessary to protect the euro, with the government bonds of Greece, Portugal, Ireland, Italy and Spain generating the biggest returns since June of 26 sovereign markets tracked by Bloomberg/EFFAS indexes.

Chancellor of the Exchequer George Osborne unveiled a cut in the government’s economic growth forecasts and said the budget deficit will take longer to tame than he originally planned. Forecasts from the Office for Budget Responsibility show the economy will shrink 0.1 percent this year instead of the 0.8 percent growth predicted in March, and expand 1.2 percent next year instead of 2 percent, Osborne said in his autumn statement to Parliament. He extended his fiscal consolidation by one year to the 2017-18 fiscal year and said he will miss his target to start cutting debt as a percentage of gross domestic product in 2015 by a year.

EUR/USD: The EUR/USD was trading lower at 1.30532 at the time of writing on profit taking before a report forecast to show the currency bloc’s economy contracted, adding to signs the three-year debt crisis is hindering growth. The euro area’s GDP probably slipped 0.1 percent in the third quarter from the previous three-month period, according to the median estimate of economists surveyed by Bloomberg News.

Moreover, uncertainties regarding the fiscal cliff in the U.S weighed on the pair. Investors should adopt a wait and see strategy on the pair as besides the GDP in the eurozone; there will be other important economic data that will come in the market today, both in the euro area and the U.S. Data which will be release in the euro area are the French Unemployment Rate (Forecast: 10.5% - Previous: 10.2%), the German Factory Orders (MoM) ( Forecast: 0.9% - Previous: - 3.3%), the Interest Rate Decision in the eurozone, economists expect the ECB will leave its key rate unchanged at 0.75 percent and the ECB Press Conference.

On the other hand, the U.S will release Initial Jobless Claims, which is expected to fall to 380K from 393K. News from the eurozone regarding the debt crisis and the latest developments in the U.S regarding the fiscal cliff will affect market sentiments. Investors should remain very prudent. The resistance level is at 1.31251 and the support level is at 1.29818.
EUR/USD
EUR/USD

GBP/USD: The pair was trading lower at 1.60872 at the time of writing after the U.K. Chancellor George Osborne revised down his prospects for economic growth and before of key risk events for the GBP. In the European session ahead, UK will release the Halifax House Price Index (MoM) (Forecast: 0.2% - Previous: -0.7%), the Trade Balance data (Forecast: -8.8B – Previous: -8.4B), the BOE QE Total and the Interest Rate Decision.

The Bank of England officials may today leave their bond-buying program on hold as they assess the need for more stimulus a day after Chancellor of the Exchequer George Osborne committed the country to five more years of austerity. Governor Mervyn King and the Monetary Policy Committee will probably leave their quantitative-easing target at 375 billion pounds ($604 billion), according to a Bloomberg News survey of economists.

A separate survey forecast that the benchmark interest rate will remain at a record-low 0.5 percent. On the other hand, the U.S will release Initial Jobless Claims, which is expected to fall to 380K from 393K. A wait and see approach is recommended on the pair. News from the eurozone regarding the debt crisis and the latest developments in the U.S regarding the fiscal cliff will continue to affect market sentiments. The resistance level is at 1.61729 and the support level is at 1.60097.
GBP/USD
GBP/USD

Gold: The yellow metal was trading lower 1687.41 at the time of writing after Goldman Sachs cut its 2013 price targets and on speculation that U.S. lawmakers will reach a budget agreement. Goldman Sachs concluded that an improving U.S. economy will prompt the Federal Reserve to hold off on its loose monetary policies and allow the dollar and interest rates to strengthen somewhat, which will curb demand for gold, a popular hedge against weakening paper currencies, especially the dollar, which trades inversely from gold.

The key risk event likely to affect the commodity is the Initial jobless claims in the U.S. Events in the eurozone and China will also affect the trend of the price of gold. News from the eurozone regarding the debt crisis and the latest developments in the U.S regarding the fiscal cliff will continue to affect market sentiments. Investors should be prudent. The resistance level is at 1696.85 and the support level is at 1627.67.
GOLD
GOLD
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