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European Market Update: German ZEW Hits Lowest Level Since 1993
Â· *** ECONOMIC DATA ***
Â· GE Nov Wholesale Price Index: M/M 1.0% v 0.6%e || Y/Y 5.7% v 5.1%e
Â· FR Q3 ILO Unemployment Rate: 8.3% v 8.4% prior || Prior revised from 8.4% to 8. 5%
Â· FR Q3 ILO Mainland Unemployment Rate: 7.9% v 8.1% prior
Â· FR Q3 Mainland Unemployment Change: -57K v -64K prior || Prior revised from -64K to -66K
Â· SW Nov CPI Headline Rate: M/M 0.6% v 0.4%e || Y/Y 3.3% v 3.0%e
Â· SW Nov CPI Underlying: M/M 0.5% v 0. 2%e || Y/Y 1.9% v 1.6%e
Â· UK Oct Visible Trade Balance: -Â£7.12B v - Â£7.4Be || Prior revised from -Â£7.75B to -Â£7.95B
Â· UK Oct Trade Balance Non-EU: -Â£4.42B v -Â£4.40Be || Prior revised from -Â£4.71B to -Â£4. 62B
Â· UK Oct Total Trade Balance: -Â£4.14B v Â£-Â£4.60Be || Prior revised-Â£5.05B to -Â£4.83B
Â· GE Dec ZEW Economic Sentiment: -37.2 v - 34.5e [lowest since January 1993]
Â· GE Dec ZEW Current Situation: 63. 5 v 67.3e
Â· EU Dec ZEW Economic Sentiment: -35.7 v -35. 0e
Â· *** SPEAKERS/COMMENTS ***
Â· SP Solbes: Sees Q4 GDP growth of around 3.3%;
Â· SP Solbes: Expects 2008 GDP around 3. 0%
Â· SP Solbes: Euro-zone inflation expectations have clearly improved
Â· ECB Liebscher: Says economic expansion remains robust despite slowdown
Â· GE DIW Institute: Forecasts Q4 GDP growth of 0. 6%
Â· GE DIW Institute: Forecasts 2007 GDP growth of 2.7%
Â· GE ZEW: Sees clear risk in growth, particularly in the US
Â· GE ZEW: Outlook for German exports is worsening
Â· GE ZEW: Sees no pick up in household consumption
Â· GE ZEW: Sees confidence crisis in Germany
Â· GE ZEW: The ECB was right to hold rates in December
Â· GE ZEW: Sees the ECB raising rates when markets allow in 2008
Â· *** FIXED INCOME/FX/COMMODITIES/ERRATUM ***
Â· Fixed income futures are currently trading higher in the session as profit taking sets in following a bout of selling yesterday on the back of hawkish comments from ECB members Stark and Liikanen. The rise in futures quickly came to an end early in the session as European inflationary pressures were visible in some Scandinavian CPI data, perhaps indicating that inflation remains a problem throughout Europe, however futures regained some upward momentum after a lower than expected reading on the German ZEW survey, but this was quickly erased after a ZEW economist said that the ECB was right to hold in December, adding that he expects the ECB to raise rates next year when conditions allow.
Â· The German Treasury began to take bids on â‚¬7.0B in 4.00% 2-year schatz overnight; results are expected tomorrow. In new supply overnight the Greek PDMA sold â‚¬1.8B in 4.10% 2012 GGBs with an average yield of 4.26% and a bid-to-cover of 3.36x. The auction was the last for the issue sold, and brought the amount outstanding for that issue up to â‚¬7.34B. The bid-to-cover compared to 3.34x on the previous auction.
Â· On the fixed income front there was no dominant theme overnight as lack luster trading was prevalent ahead of today's FOMC announcement. Trade was driven by the Euro/Cable overnight as the Euro was weaker following weaker Zew data, and a stronger cable following the narrowing trade deficit. The Dollar has been mixed against the European pairs overnight. The Swedish Krona rose to session highs following the release of stronger than expected inflation data for the month of November.
Â· In equities the recent rise in consolidation continued. The relatively small BBI Holdings in the UK was acquired overnight in a Â£84M deal, while France's STM Electronics announced a deal to acquire Genesis Microchip in the US for a total of $336M. The European indices opened the session in positive territory, but a combination of weaker than expected sentiment data in Germany and the Euro-Zone weighed down on the indices mid- session as well as comments from ZEW economist Franz. Franz said that further financial market turmoil may occur in the spring. Similarly S&P futures declined on the back of the weaker than expected ZEW data as well as ZEW comments regarding the US economy.
Â· On the speaker front comments ran thin overnight. The ECB's Liebscher and the Spanish finance minister both reiterated some of their recent comments. Comments from the ZEW economists post data release were the most effective, adding downside momentum to the European fixed income futures as market participants seem to believe that the ECB will not be able to ignore the prevalence of inflationary pressures in 2008.
Â· Front month crude futures are trading in positive territory in the session, but are in the mid-to-lower end of their session range. There was little market moving news on the commodity front overnight. On the geopolitical front there were reports of two explosions in Algiers overnight. At least one of the explosions was the result of a suicide bomber. A preliminary report indicated 20 deaths, and up to 40 injuries. The news did not cause any reaction in crude.
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Amazing Trader EVENT RISK Calendar:
Mon 18 Dec
10:00 EZ- final HICP
Tue 19 Dec
09:00 DE- IFO Survey
13:30 US- Housing Starts/Permits
13:30 US- Current Account
Wed 20 Dec
15:00 US- Existing Homes Sales
15:30 US- EIA Crude
Thu 21 Dec
03:00 JP- BOJ Decision
13:30 CA- CPI & Retail Sales
13:30 US Weely Jobless
13:30 US- GDP
Fri 22 Dec
09:30 US- GB- GDP
13:30 US- core PCE Deflator & Presonal Income
15:00 US- New Homes Sales
15:00 US- final University of Michigan
17:00 US- early Closes
Mon 25 Dec
00:00 Christmas Holidays
Potential Trading Opportunities
John M. Bland, MBA
- POTENTIAL PRICE RISK: Medium Mon--10:00 GMT-- EZ- final November HICP. flash data are rarely changed.
- POTENTIAL PRICE RISK: HIGH- Medium Tue --09:00 GMT-- DE- IFO Survey. Key report but usually not a market-mover
- POTENTIAL PRICE RISK: HIGH- Medium- Tue --13:30 GMT-- US- Housing Starts and Permits. Leading indicators of activity
- POTENTIAL PRICE RISK: HIGH-Medium- Wed --15:00-- US- Existing Homes Sales. Top Housing statistic
- POTENTIAL PRICE RISK: Medium- Wed --15:30-- US- EIA Crude
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