Previous Story
Euro Rebounds Following Strong Confidence Reading
EUR/USD logged a rebound high of 1.0950, following a one-month low seen on Wednesday at 1.0819. The move breached yesterday’s high at 1.0929, but stalled shy of the 50-day moving average at 1.0955. An above-forecast Eurozone ESI confidence reading for May, of 103.8, unchanged from April, aided the euro’s rebound, though the ECB stated in its latest Financial Stability Review that sovereign risks emanating from Greece had increased sharply.
German April import price inflation came in slightly higher than expected at -0.6% year over year, up from -1.4% year over year in the previous month. Prices rose 0.6% month over month, mainly on the back of a 3.2% month over month rise in prices for energy goods. Stabilizing oil prices and the weaker EUR are driving up energy prices again and while the annual rate for energy goods remains firmly in negative territory and is keeping overall import price inflation in negative territory, it is only a matter of time until the rates jumps back up, if current trends continue.
EMU May ESI economic confidence better than expected, with the overall reading holding steady at 103.8, unchanged from April, which was in turn revised up from 103.7 reported initially. The breakdown showed a modest improvement in manufacturing and construction sentiment, although both reading remain in negative territory. Consumer confidence dipped further, but this was compensated for by a turnaround in retail sentiment, which was positive for the first time since at least September last year. Services sentiment also picked up.
The ECB in its latest Financial Stability Review said sovereign risks emanating from Greece have increased sharply owing to heightened political uncertainty over the past six months. At the same time the banking sector in Greece has witnessed substantial deposit outflows, a loss of access to the wholesale funding market and deteriorating asset quality. It warned that financial market reactions have so far been muted but that without a quick agreement, the risk of an upward adjustment of the risk premium demanded on vulnerable euro area sovereign could materialize.
The post Euro Rebounds Following Strong Confidence Reading appeared first on Forex Circles.
