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Morning Forex Fundamental Print E-mail
Daily Forex Fundamentals | Written by Dukascopy Swiss FX Group | Feb 14 13 09:45 GMT

Morning Forex Fundamental

EUR

'The Eurozone is showing clear signs of healing, with the downturn easing sharply in January and the region moving closer to stabilization in the first quarter' - Chris Williamson, Markit's chief economist

Production among the 17-nation Eurozone manufacturers showed a sharp turnaround in December, adding to signs that the region's economy is starting to recover, the statistical office of the European Union Eurostat said Wednesday. On an annual basis, industrial production declined by 2.4% in December, while on a monthly basis, a gauge of industrial output added 0.7% in the last month of 2012, reversing the previous month's 0.7% decrease. Analysts, however, expected only a 0.2% rise. The monthly gain was mostly supported by durable consumer goods along with non-durable consumer goods, which were the most rising sectors, as both increased by 2%. At the same time, capital goods added 1.3% in the reported period.

'The Eurozone is showing clear signs of healing, with the downturn easing sharply in January and the region moving closer to stabilization in the first quarter,' said Chris Williamson, Markit's chief economist.

'The fourth quarter is probably the trough of the cycle, Draghi is hopeful that it will be,' said Marchel Alexandrovich, an economist at Jefferies International Ltd. in London. 'We should see some improvement in economy in the first half of this year. The question is, whether it's strong enough' given the risks that lie ahead, he said.

USD

'It adds to expectations that growth is likely to be lackluster in the opening quarter of the year, due mainly to the expiration of that payroll tax cut' - Joe Manimbo, a senior market analyst at Western Union Business Solutions

U.S. consumers increased their purchases of retail goods in January at a slower pace, suggesting that an increase in payroll taxes took a bite out of consumers' pay checks. The report by the Commerce Department showed that the U.S. retail sales edged up only 0.1% after an unrevised 0.5% rise in December. During the 2012 retail sales have risen an unadjusted 4.4%, more than twice the rate of consumer inflation. Taxes on working Americans went up 2% last month, after the end of a tax break put in place two years ago to spur the struggling economy. A slowdown in the consumer spending, which accounts for as much as 70% of the U.S. economy, as well as in sales at retailers, which represent about one-third of that consumption, is adding to concerns that the U.S. economy cannot rely on the consumer spending at the beginning of the year.

'It adds to expectations that growth is likely to be lackluster in the opening quarter of the year, due mainly to the expiration of that payroll tax cut,' said Joe Manimbo, a senior market analyst at Western Union Business Solutions.

'The payroll tax increase is having some impact on spending here,' said Thomas Simons, an economist with Jefferies Group Inc. in New York, whose firm after today's report is the second-best forecaster of retail sales for the past two years.

GBP

'Inflation is likely to rise further in the near term and may remain above the 2% target for the next two years' - The governor of the Bank of England Sir Mervyn King

The inflation rate in the U.K. is widely expected to remain stubbornly high for longer than previously thought, while the economy has begun to recover, albeit slowly. The governor of the Bank of England Sir Mervyn King expects the pace of consumer price increase, which currently is 2.7%, to rise to at least 3.0% by the summer and to remain above the Bank's 2% target for two years. The economy shrank by 0.3% in the last three months of 2012, fuelling fears that the U.K. could re-enter recession, defined as two consecutive quarters of contraction, while King predicts a muted economic recovery.

'Inflation is likely to rise further in the near term and may remain above the 2% target for the next two years,' King said as he presented the central bank's Inflation Report in London today. 'The MPC's remit is to deliver price stability in the medium term in a way that avoids undesirable volatility in output in the short run. The prospect of a further prolonged period of above-target inflation must therefore be considered alongside the weakness of the real economy. If necessary, we will do more. We must recognize, however, that there are limits to what can be achieved via general monetary stimulus -- in any form - on its own.'

JPY

'Japan's economy can emerge from recession in the first quarter as consumer spending and exports are expected to pick up' - Yamamoto, senior economist at Mizuho Research Institute

Activity within the Japanese tertiary sector jumped unexpectedly in the last month of 2012, indicating that consumers are getting less anxious over the world's third largest economy's outlook. According to the Ministry of Economy, Trade and Industry, a gauge, which measures the domestic service sector in Japan, such as information and communication, electricity, gas heat and water, transport, wholesale and retail trade, climbed a seasonally adjusted 1.4% on month in December, after a 0.4% contraction in the preceding month. Latest data indicate that companies are showing willingness to increase their spending due to Shinzo Abe's pledge to introduce more bold measures in order to boost the economy.

'Japan's economy can emerge from recession in the first quarter as consumer spending and exports are expected to pick up,' said Yasuo Yamamoto, senior economist at Mizuho Research Institute. 'But in order for growth to accelerate even further, capital expenditure needs to improve. Unfortunately, capital expenditure is likely to remain weak.'

'There have been signs of the economy bottoming out,' Yoshiki Shinke, chief economist at Dai-Ichi Life Research Institute. 'It would not be surprising to see the decline in the coincident index coming to a halt in the near term.'

CHF

'Thanks to the minimum exchange rate the franc was stable in 2012, and since the start of 2013 has lost some of its strength'

Analysts at Credit Suisse Group AG Producer and imports price in Switzerland gained less than initially was estimated in January, indicating weak demand for goods and raw materials by manufacturers. According to the Federal Statistics Office, a gauge of prices of products ranging from factory to farm goods as well as imports, increased 0.8% from a year earlier after climbing an annual 1% in December. On a monthly basis, prices fell by 0.1%, after a 0.1% gain in the preceding month, well below analysts' expectations, which called for a 0.2% reading. Import costs declined 0.3% in the month and 0.1% from a year earlier, report also showed. Producer prices dropped 0.1% in the month and advanced 1.2% from a year earlier.

'Thanks to the minimum exchange rate the franc was stable in 2012, and since the start of 2013 has lost some of its strength,' said analysts at Credit Suisse Group AG, which co-compiled the index. 'Simultaneously with the depreciation, industry appears to have finally passed the trough,' they said.

'We've seen a net decline but, of course, the month had two working days less,' said Alessandro Bee, an economist at Sarasin. 'Adjusted for this, there was still a drop but not as strong. This reflects the recession in Europe.'

Press Review

Europe

After marathon talks in Brussels European Union leaders agreed a deal on the bloc's next seven-year budget. The new deal includes up to 908 billion euros in forecast payments, which will be spent between 2014 and 2020.

The number of German factory orders rose 0.8% from November, when they fell 1.8%, and above analysts' expectations of a 0.7% growth. The improvement was, mostly, supported by the 7% gain in the number of orders from the Eurozone.

UK set for low GDP growth for at least two years, Bank of England warns

Inflation is forecast to remain above the central bank's 2% target until at least the end of 2015 – peaking at 3.2% later this year.

EU Sets Ambitious US Trade Pact Deadline

The EU and the US on Wednesday vowed to complete talks on a new trade agreement within two years, as the two trading powers outlined an ambitious timeline for a project that boasts huge commercial potential but is also rife with complications.

Portugal's unemployment rate rises to record 16.9 pct

Portugal's unemployment rate rose to a record 16.9 percent in the fourth quarter last year, up from 15.8 percent in the previous quarter, according to data released Wednesday by the country's National Statistics Institute (INE).

USA

The U.S. trade deficit fell by 21% to a seasonally adjusted $38.5 billion from $48.6 billion in November, posting the smallest trade gap since January 2010.

Canada posted a smaller-than-expected trade deficit of C$901 million ($901 million) in December from a revised C$1.67 billion deficit in the prior month, due to a significant drop in imports.

Retailers being misled by credit, debit companies, watchdog says

A federal consumer watchdog says some credit and debit card payment companies are breaking rules it created to protect retailers, which in turn could be costing Canadians more money.

Treasury nominee wins over critics, says tax reform top priority

Jack Lew, President Barack Obama's pick to be U.S. treasury secretary, on Wednesday defused heated questions from lawmakers about his work at Citigroup and managed to find common ground with critics over the need for tax reform.

Obama seeks to break free of budget fight

President Barack Obama used his State of the State of the Union address Tuesday to urge Republicans to end 'manufactured' crises over the federal budget deficit and come together to take steps to aid the middle class.

Asia & Pacific

The broadest measure of Japan's trade with the rest of the world was 264.1 billion yen ($2.8 billion) in December, while for the overall 2012, trade surplus stood at 4.7 trillion yen ($50 billion), the smallest annual surplus since comparable data was made available in 1985.

Consumer prices in China added 2.0% in January, slowing from December's 2.5% pace, however, meeting analysts' expectations.

Japanese economy contracts for third straight quarter

Japan's economy contracted for the third straight quarter in the three months to end of December, underlining the challenges the new government faces in reviving growth.

Australia Inflation Expectations Rise For Second Month

Australia's inflationary expectations rose for the second consecutive month in February, the Melbourne Institute Survey of Consumer Inflationary Expectations showed Thursday.

China's foreign trade still smaller than US

China's combined export and import volume in 2012 still ranked behind that of the United States when using the same method to measure, the Ministry of Commerce (MOC) said Wednesday

 

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Dukascopy Swiss FX Group

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This overview can be used only for informational purposes. Dukascopy SA is not responsible for any losses arising from any investment based on any recommendation, forecast or other information herein contained.

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