EUR/USD: Technical + Fundamental Analysis for Fri 8/4/23
The Euro dropped to approximately $1.09 at the start of August, its lowest level in four weeks. This was because of the strength of the US dollar, which was fueled by statistics pointing to a robust US economy and by a rise in risk aversion after Fitch downgraded the US credit rating from AAA to AA+. Recent PMI data suggested that the services sector was slowing more than the industrial sector while everything was happening in Europe. over this, GDP in the Euro Area rebounded in the second quarter, growing by 0.3% over forecasts of 0.2% growth. Headline inflation fell to 5.3%, the lowest level since January 2022, according to early estimates from the CPI, but core inflation stayed steady at 5.5%, substantially above the ECB's target of 2%. After raising interest rates by 25 basis points (bps) last month, the European Central Bank (ECB) president Lagarde said in an interview with Le Figaro that the ECB might raise rates again in September, or it could take a pause.
Both the DAX and STOXX 600 dropped by roughly 0.3% on Friday afternoon as traders processed corporate results and payrolls data showing hints that the labor situation in the United States is slowing down. After reporting a decline in sales and profits for the first half of the year, real estate company Vonovia (-3%) was one of the worst performers on the DAX. Following the release of this information, shares of Vonovia were among the DAX's worst performances. After reporting an increase in expenses, Commerzbank saw its share price drop by almost 2.1 percent. Trading for Infineon was down by almost 3.5 percent, extending its losing streak to four days, after the firm warned that its margin outlook for the final quarter would fall short of expectations. Maersk, the world's second-largest shipping company, announced a loss in earnings for the second quarter, causing the stock price to fall by 3.7% over the same time period. Banca Monte dei Paschi di Siena (up 3.5%) and Credit Agricole (up 6.4%) both saw their share prices rise after reporting better-than-expected financial results. Fitch's decision to downgrade the United States' credit rating has made investors wary, and this week's losses for the two benchmark indexes are projected to total approximately three percent. Retail sales in the Euro Area declined 0.3% from the previous month in June 2023, below market expectations of 0.2% rise. This followed a revised gain of 0.6% in May. Sales of nonfood products fell by 0.2% from May, while sales of food and drink fell by 0.3%. Sales of cigarettes were down 0.3% from May. Alternatively, sales of both fuel for automobiles (one percent vs half a percent) and mail orders and online sales (one percent versus minus one percent) both grew. After dropping by 2.4% month-over-month in May, retail sales dropped by 1.4% year-over-year. Originating in: EUROSTAT
July 2023 saw the steepest monthly drop in construction activity since December 2022, as the HCOB Eurozone Construction PMI fell from 44.2 the previous month to 43.5. The decline in residential construction was the most severe since April of 2020, and it was the primary factor in the 15th consecutive month of output decline. There was also no change from June's levels in the number of civil engineering projects, and the rate at which commercial work was declining to its lowest point in seven months. Since August 2022, companies have decreased their purchasing operations for sixteen consecutive months as a consequence of a decrease in the inflow of new business. The number of employed persons has also fallen for the sixth straight month, but the rate of loss has moderated since hitting a nearly three-year low in June. As a result of lower demand and an abundance of raw materials, the cost of manufacturing inputs increased at the slowest pace in over seven years. The corporate prognosis for the next year remained gloomy, with the preceding seven months seeing the greatest increase in pessimism. Markit Economics as the reference. Compared to market expectations of a decline of 0.2%, producer prices in the Euro Area fell by 0.4% from May to June 2023, representing the sixth consecutive period of reduction. Compared to May, when prices decreased by 1%, intermediate commodities including steel, sugar, and wood declined by 0.7%. In addition, the cost of energy decreased by 0.5%, compared to a decrease of 5.2%. Meanwhile, the cost of machinery, tools, and buildings has gone up by 0.1% after being flat in the previous month. However, the costs of both long-lasting and disposable goods stayed the same. After an initial 0.5% reduction in May, producer prices were revised up to a 0.3% drop in June after energy's impact on prices was factored out of the original calculation. Originating in: EUROSTAT
In June 2023, producer prices in the Euro Area fell by 3.4% year-over-year, compared to market expectations of a loss of 3.1% and an upwardly revised 1.6% reduction in May. In large part due to falling energy prices (-16.5% from May to June compared to -13.5%), producer prices fell for a second month in a row. While the price rises for capital goods (5.2% vs 5.6%), durable consumer goods (5.9% versus 6.7%), and non-durable consumer goods (8.9% versus 9.6%) slowed substantially, the prices of intermediate items also decreased (-2.7% versus -1.5%). Producer prices have fallen for six months in a row, with the most recent monthly drop being 0.4%. The market had forecast a drop of 0.2%, therefore this result was unexpected. Originating in: EUROSTAT. Preliminary data suggest that in July 2023, the annual inflation rate in the Euro Area fell to 5.3%, from 5.5% in June. This outcome conformed to market expectations. This is the lowest figure since January of 2022 due to further falls in energy costs (-6.1% vs. -5.6%), slower declines in the cost of food, alcohol, and cigarettes (10.8% vs. 11.6%), and lower prices for non-energy industrial items (5% vs. 5.5%). However, service sector inflation has been on the rise, increasing to 5.6% from 5.4% earlier this year. Meanwhile, core inflation (which excludes fluctuations in the prices of energy, food, alcohol, and cigarettes) held constant at 5.5%, above expectations of 5.4%. The last time the core rate was greater than the headline rate was in 2021. The Euro Area's consumer price index dropped 0.1% between June and July. The target inflation rate for the European Central Bank is 2%. Originating in: EUROSTAT The HCOB Eurozone Manufacturing PMI fell from 43.4 in June 2023 to 42.7 in July 2023. Consistent with its flash estimate, this was the first complete year of contractions in the manufacturing sector of the currency bloc, marking the lowest figure in three years. This was because the sting of the European Central Bank's (ECB's) increased borrowing rates persisted. Factory production declined significantly over time, especially when the first few months of the epidemic were subtracted from the total. Reductions in the industry dealing with intermediate items were mostly responsible for this. The greatest drop in new orders since 2009 could not be fully compensated for by the clearance of backlogs. Because of this, purchasing slowed for an extra month, and businesses reduced their stock. Supply chains were able to take a breather and minimize lead times as a result of the weak economy and lower consumer spending. Reduced lead times and less stress on supply chains led to lower input costs, which in turn led to lower output prices. Markit Economics as the reference.
By Taylor Norboge at 1320 utc on Fri August 04, 2023
Both the DAX and STOXX 600 dropped by roughly 0.3% on Friday afternoon as traders processed corporate results and payrolls data showing hints that the labor situation in the United States is slowing down. After reporting a decline in sales and profits for the first half of the year, real estate company Vonovia (-3%) was one of the worst performers on the DAX. Following the release of this information, shares of Vonovia were among the DAX's worst performances. After reporting an increase in expenses, Commerzbank saw its share price drop by almost 2.1 percent. Trading for Infineon was down by almost 3.5 percent, extending its losing streak to four days, after the firm warned that its margin outlook for the final quarter would fall short of expectations. Maersk, the world's second-largest shipping company, announced a loss in earnings for the second quarter, causing the stock price to fall by 3.7% over the same time period. Banca Monte dei Paschi di Siena (up 3.5%) and Credit Agricole (up 6.4%) both saw their share prices rise after reporting better-than-expected financial results. Fitch's decision to downgrade the United States' credit rating has made investors wary, and this week's losses for the two benchmark indexes are projected to total approximately three percent. Retail sales in the Euro Area declined 0.3% from the previous month in June 2023, below market expectations of 0.2% rise. This followed a revised gain of 0.6% in May. Sales of nonfood products fell by 0.2% from May, while sales of food and drink fell by 0.3%. Sales of cigarettes were down 0.3% from May. Alternatively, sales of both fuel for automobiles (one percent vs half a percent) and mail orders and online sales (one percent versus minus one percent) both grew. After dropping by 2.4% month-over-month in May, retail sales dropped by 1.4% year-over-year. Originating in: EUROSTAT
July 2023 saw the steepest monthly drop in construction activity since December 2022, as the HCOB Eurozone Construction PMI fell from 44.2 the previous month to 43.5. The decline in residential construction was the most severe since April of 2020, and it was the primary factor in the 15th consecutive month of output decline. There was also no change from June's levels in the number of civil engineering projects, and the rate at which commercial work was declining to its lowest point in seven months. Since August 2022, companies have decreased their purchasing operations for sixteen consecutive months as a consequence of a decrease in the inflow of new business. The number of employed persons has also fallen for the sixth straight month, but the rate of loss has moderated since hitting a nearly three-year low in June. As a result of lower demand and an abundance of raw materials, the cost of manufacturing inputs increased at the slowest pace in over seven years. The corporate prognosis for the next year remained gloomy, with the preceding seven months seeing the greatest increase in pessimism. Markit Economics as the reference. Compared to market expectations of a decline of 0.2%, producer prices in the Euro Area fell by 0.4% from May to June 2023, representing the sixth consecutive period of reduction. Compared to May, when prices decreased by 1%, intermediate commodities including steel, sugar, and wood declined by 0.7%. In addition, the cost of energy decreased by 0.5%, compared to a decrease of 5.2%. Meanwhile, the cost of machinery, tools, and buildings has gone up by 0.1% after being flat in the previous month. However, the costs of both long-lasting and disposable goods stayed the same. After an initial 0.5% reduction in May, producer prices were revised up to a 0.3% drop in June after energy's impact on prices was factored out of the original calculation. Originating in: EUROSTAT
In June 2023, producer prices in the Euro Area fell by 3.4% year-over-year, compared to market expectations of a loss of 3.1% and an upwardly revised 1.6% reduction in May. In large part due to falling energy prices (-16.5% from May to June compared to -13.5%), producer prices fell for a second month in a row. While the price rises for capital goods (5.2% vs 5.6%), durable consumer goods (5.9% versus 6.7%), and non-durable consumer goods (8.9% versus 9.6%) slowed substantially, the prices of intermediate items also decreased (-2.7% versus -1.5%). Producer prices have fallen for six months in a row, with the most recent monthly drop being 0.4%. The market had forecast a drop of 0.2%, therefore this result was unexpected. Originating in: EUROSTAT. Preliminary data suggest that in July 2023, the annual inflation rate in the Euro Area fell to 5.3%, from 5.5% in June. This outcome conformed to market expectations. This is the lowest figure since January of 2022 due to further falls in energy costs (-6.1% vs. -5.6%), slower declines in the cost of food, alcohol, and cigarettes (10.8% vs. 11.6%), and lower prices for non-energy industrial items (5% vs. 5.5%). However, service sector inflation has been on the rise, increasing to 5.6% from 5.4% earlier this year. Meanwhile, core inflation (which excludes fluctuations in the prices of energy, food, alcohol, and cigarettes) held constant at 5.5%, above expectations of 5.4%. The last time the core rate was greater than the headline rate was in 2021. The Euro Area's consumer price index dropped 0.1% between June and July. The target inflation rate for the European Central Bank is 2%. Originating in: EUROSTAT The HCOB Eurozone Manufacturing PMI fell from 43.4 in June 2023 to 42.7 in July 2023. Consistent with its flash estimate, this was the first complete year of contractions in the manufacturing sector of the currency bloc, marking the lowest figure in three years. This was because the sting of the European Central Bank's (ECB's) increased borrowing rates persisted. Factory production declined significantly over time, especially when the first few months of the epidemic were subtracted from the total. Reductions in the industry dealing with intermediate items were mostly responsible for this. The greatest drop in new orders since 2009 could not be fully compensated for by the clearance of backlogs. Because of this, purchasing slowed for an extra month, and businesses reduced their stock. Supply chains were able to take a breather and minimize lead times as a result of the weak economy and lower consumer spending. Reduced lead times and less stress on supply chains led to lower input costs, which in turn led to lower output prices. Markit Economics as the reference.
By Taylor Norboge at 1320 utc on Fri August 04, 2023
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