Euro Area Unemployment Rate at 10.3%

Unemployment has fallen by a month on month 0.1% down to 10.3% in the euro area for February, according to the latest figures from Eurostat.

Despite the marginal decline in the data, this is the lowest total recorded in the euro area since August 2011.

Compared to a year ago, the figures are more favourable, as unemployment on February 2015 was 11.2%.

For the whole of the European Union, the number of those out of work remained unchanged month on month, at 8.9%.

Following the trends of the euro area, unemployment was down year on year compared to the 9.7% out of work in February 2015, and the current figure is the lowest in the EU recorded since May 2009.

Among the Member States, the lowest unemployment rates in February 2016 were recorded in Germany  on 4.3%  and the Czech Republic with 4.5%.

The highest unemployment rates were observed, perhaps unsurprisingly, in Greece  with a significant 24.% inactive, from data in December last year.

Even though they have made improvements to their high unemployment rate, Spain still have the second highest amount of people without work on 20.4%.

Industrial producer prices down by 0.7% in Euro Area

In February 2016, compared with January 2016, industrial producer prices fell by 0.7% in the euro area,  and by 0.6% in the EU28, according to the latest Eurostat estimates

The fall in costs has eased compared to the figures for January 2016, where  prices decreased by 1.1% in both zones.

Year on year, in February 2016, compared with February 2015, industrial producer prices fell by a considerable 4.2% in both the euro area and the EU.

The figures will be a further disappointment to the European Central Bank in their quest to reach their premium inflation target of 2%. Inflation spiralled downwards to a minus 0.2% in February.

The latest decrease in prices month on month, can mainly be attributed to the fall in energy sector bills by 2.1%.

And a drop of 0.4% for intermediate goods costs, and additionally a reduction  of 0.2% for nondurable consumer goods.

Prices remained stable for capital goods and increased by 0.1% for durable

consumer goods, while costs in total industry excluding energy fell by 0.2%.

Euro Begins Week Increasing Against the Dollar

The euro has began the week continuing its bullish trend against the US dollar, and the EUR/USD rate is currently $1.13 Central European Time (CET).

LMAX Exchange in their daily report said that the market remains well supported on buying stocks, reaching fresh 2016 highs.

Overall, the broader EUR/USD downtrend remains intact they opined,  and with the price now trading up towards 1.1500, there is risk for another topside failure and bearish reversal.

Also, the forex company says to look for additional upside to remain well capped below EUR/USD 1.15 on a daily close basis, while ultimately, only back above 1.170 would force a shift in the structure.

A break below 1.1335 will help to strengthen this outlook, and alleviate immediate topside pressure.

The GBP/USD rate is currently a pound buying $1.422 GMT, and has climbed steadily higher from below the $1.42 mark yesterday afternoon.

Gold Continues To Show Weakness

Gold has been one of the stand-out performing commodities in recent months amid persistent volatility across stock markets, sparking fresh demand for safe-haven assets. Gold reversed early losses on Monday but still ended slightly down on a quiet trading day. Gold is trading at 1220 down by almost $3. Silver was flat at 15.195 and platinum fell over $6 to 947.40.

A speaking appearance by Fed Chair Janet Yellen this afternoon will be one of the key events gold markets will be watching this week, said Brown Brothers Harriman. The Fed chief is scheduled to address the Economic Club of New York during a luncheon gathering.

gold

“It is her first major event since the FOMC (Federal Open Market Committee) meeting and follows comments by at least four regional Fed presidents sounding somewhat less dovish than the market understood by the FOMC statement and the dot plot,” BBH added.

The firm said that it does not expect Yellen’s comments to deviate much from the last FOMC statement and her remarks at the press conference after the March Fed meeting.

“She is managing the transition and the beginning of the normalization of monetary policy with a broad consensus,” BBH noted.” There was no dissent in December when rates were hiked.”

Globally, gold hit its lowest in a month today, as the dollar firmed ahead of new US economic data and speeches by Federal Reserve officials that may signal more interest rate increases than anticipated.

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Stocks were struggling to erase losses on Monday tied to another down day for oil prices as Wall Street weighs mixed economic data against the possibility for the Federal Reserve raising interest rates next month following hawkish comments from Federal Reserve officials last week and an upward revision to Q4 GDP on Friday.

The week kicked off with US data above-consensus gain in February personal income of 0.2% and in-line 0.1% increase in spending. And although January personal income was left unchanged with a 0.5% rise, personal spending was revised lower to a 0.1% advance from original reports of a 0.5% gain.

The price component of the data also was disappointing as the core price index increased 0.1%, compared with estimates looking for a 0.2% gain while the year-over-year index dropped to 1.7% from 1.8%, slipping farther away from the Fed target of a 2.0% rise.

core pce index

Meanwhile, pending home sales improved dramatically last month with the index climbing 3.5% to a 109.1 reading, more than twice expectations for a gain of 1.5%, and more than offsetting a downward revised 3.0% decline in January.

Other data on Monday included the U.S. trade deficit in goods widening to $62.86 billion from a $62.23 billion deficit, and a better-than-expected improvement in the Dallas Fed manufacturing index to negative 13.6 in March from negative 31.8 reading during the prior month, beating estimates of a negative 26.0 score.

Gold is up some 15% so far this year, having attracted investors looking for havens amid concerns about global economic growth earlier in the year. But the yellow metal has given up some gains in recent weeks amid expectations the Federal Reserve could raise interest rates sooner rather than later.

 

Terrorism & The US Dollar Weigh On Oil Prices

Geopolitical turmoil weighed heavily on oil prices this week. Terrorism in Brussels’s continued to dominate the headlines as well as the trader’s sentiment. The oil price has fallen since the attacks in Brussels on Tuesday morning as investors look to put their money into so-called safe-haven assets like gold and government bonds. Two blasts were heard at Brussels airport  on Tuesday morning, closely followed by a third at a city Metro station near EU buildings. Both the Metro system and the airport were closed as rescuers sought to evacuate anyone inside.

The strength of the US dollar also kept oil prices below the $40 level. WTI is trading at 39.59 and Brent at 40.44. Markets were closed for the Good Friday holiday and many remain closed on Monday including Australia, New Zealand and the UK.  Crude oil prices faced the risk of going down again if necessary measures are not put in place. For the last two years, oil prices have been declining and we have seen the impact it had on the global economy.

 

The nightmare was to be over as for the last one month, we have seen oil prices rebound. However, what we have seen this week reminds as that it is easier to go down than to climb higher.

crude oil

The decline in crude oil prices seen this week has been termed as the first weekly decline since mid-February. The decline has been associated with the rise of US crude stockpiles. We can hope that the meeting by oil producers in Qatar on April will achieve output cut.

The oil producers greatly felt the impact of low crude oil prices for those two years. For this reason, it is expected of them to come together and agree on what will be done to ensure it does not happen again.

Some of the Non-OPEC members have agreed that the best way to deal with low crude oil prices is by reducing the supply. Kuwait, a small OPEC member country on the coast of the Persia Gulf, squeezed between Iraq and Saudi Arabia, is sitting on the world’s sixth largest proven oil reserves. The country, like its Saudi neighbor, has provided luxury benefits for its citizens, such as free education and healthcare as well as subsidized fuel and even food. But the Kuwaiti government has questioned its ability to maintain these benefits in the current market, warning of an impending “economic suicide” if measures are not taken.

“We cannot lie to the Kuwaiti people, we cannot come here and say we will protect your pockets and the citizen will not be affected,” said Marzouq al-Ghanim, Kuwait’s Parliament Speaker. “Everyone’s pockets will be affected… This is the reality.”

The government has already attempted to remove a portion of subsidies last year, which was met by heavy criticism within the country, prompting the benefits to be restored.

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Futures fell as much as 3.7% on Thursday ahead of the holiday after slumping 4% on Wednesday.

Inventories rose by more than three times what was projected in a survey, while imports last week increased to the highest since June 2013, Energy Information Administration data showed. Oil also dropped as renewed prospects for higher US interest rates boosted the dollar, cutting the appeal of commodities as an alternative investment.

Oil tumbled to a 12-year low last month before rebounding on speculation the global surplus will ease as US production declines and major producers including Saudi Arabia and Russia proposed an output freeze. Iraq and the United Arab Emirates joined the list of confirmed attendees at a meeting between major exporters in Doha next month.

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3 Factors Weighing Down Oil Prices

The terrorist attacks and threats of more kept traders on edge this week. Global markets slowly shifted to risk off mode which sent the US dollar and yen on a small rally. The upswing of the greenback weighed on commodities stretching from based metals to energy. Crude oil prices fell close to $2.00 and is trading at 39.72 while Brent oil declined just about $1.50 to 40.45. Price has fallen since the attacks in Brussels on Tuesday morning as investors look to put their money into so-called safe-haven assets like gold and government bonds.

oil brent

The EIA released its weekly petroleum status report Wednesday morning. U.S. commercial crude inventories increased by 9.4 million barrels last week, maintaining a total U.S. commercial crude inventory of 532.5 million barrels. The commercial crude inventory stands at historically high levels for this time of year, according to the EIA.

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Tuesday evening, the American Petroleum Institute (API) reported that crude inventories rose by 8.8 million barrels in the week ending March 18. For the same period, analysts had estimated an increase of 2.7 million barrels in crude inventories. API also reported gasoline supplies fell by 4.3 million barrels and distillate stockpiles fell by 391,000 barrels.

US crude oil reached a recent peak of $42.49 last Friday and has been trailing down since to settle about a dollar a barrel lower on Tuesday. The word has finally gotten around that the spike was very likely the result of short covering, not any fundamental change in supply and demand.

Investors are still hopeful that the planned meeting between members of OPEC and other oil-producing nations that has been scheduled for April 17 will have some impact on market fundamentals. Any impact will, at best, be tiny. Iran already has said it will not freeze or cut production. Libya has said the same thing.

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In a recent report, the IMF said that all emerging markets are facing diminished growth prospects over the next five years, but those of the Middle East and Central Asian countries are expected to be 1.25 percentage points below the emerging market and developing country average.

Six years after the Arab Spring movement promised more economic inclusiveness and higher living standards, much of the Middle East remains mired in conflict, weighing on economic activity across the region as millions of refugees flee, IMF Middle East director Masood Ahmed said in the document.

“At the same time, the new ‘lower for longer’ oil price reality has dampened oil-exporting countries’ longer-term growth prospects and rendered their oil-centered economic growth models untenable,” Mr Masood said.

The region’s oil exporters are being forced to cut spending and shrink bloated public sector employment that had been fueled by oil revenues, weighing on living standards and growth prospects, the IMF said.

Oil slumped to a 12-year low this year before rising on speculation that stronger demand and falling U.S. output will ease the global surplus. There’s potential for supply shocks in the future after energy companies from Chevron Corp. to BP cut billions of dollars in spending amid the price crash, according to the International Energy Agency.

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Euro Area Growth Highest In Three Months Say Markit

The euro area economy has found some momentum, and is now growing at its fastest rate since December last year, according to global financial information services company Markit.

Their flagship Purchasing Managers’ Index (PMI), which tracks business patterns, rose to a score of 53.7 in March, climbing up 0.7 month on month.

Although despite the monthly rise in performance, the Markit survey also discovered that their PMI reading for the first quarter this year was the lowest quarterly figure for a  year, at 53.4.

The euro area’s March revival was led by the services sector, where business grew at a three month high, reversing the 13 month low that the industry suffered in the February survey.

Expectations in the service sector are also higher for this year, with the new found optimism creating the second highest levels of anticipation seen over the past 11 months.

Manufacturing has also seen an increase in output, but only on  slender scale, improving on the 12 month low that was found in February’s survey.

Overall, employment  did rise, but it was only the smallest growth for jobs in the industry since September last year.

Prices continued to fall, with average input costs dropping for the third successive month.

This fuelled the driving down of average prices charged by firms for their goods and services, at the second fastest rate seen for just over a year.

Germany and France Growing Says Survey

Germany again saw growth in their economy Markit revealed, although the rate of economic expansion was on a par with what was recorded in February.

Service expansion remained solid, but manufacturing only grew at a modest pace, while new order growth was the weakest it has been for eight months, and job creation the slowest for 11 months.

France can be satisfied as  the survey found  that business activity rose again, after sliding into contraction in February.

Both manufacturing and services saw modest revivals in March. However, the overall rate of growth remained only modest, and job creation was closer to stagnation.

 UK Inflation Unchanged in February 

Official figures have revealed that inflation in the UK has remained unchanged at 0.3% for February, compared to the previous month.

The data will be disappointing, as the past three months have shown small increases in prices, and historically this is a relatively low figure.

Contributions from pricing groups, were relatively smaller compared to most months in influencing the index.

The largest downward contribution came from the transport sector, as items such as road passenger transport, second-hand cars and bicycles, recorded a fall in prices.

This was mostly offset by a rise in food prices, with vegetables increasing the most in costs.

The latest prices index, confirms a pattern that has emerged since the beginning of 2015, where prices for transport costs, food and non-alcoholic beverages, and recreational and cultural goods and services have pulled inflation downwards.

While these trends have been counterbalanced, by price rises for other goods and services, especially restaurant and hotel bills, and education costs such as university tuition fees.

The 0.3% figure, is still way behind the 2% inflation target set by the Bank of England.

UK Pound Moves Up Despite ‘Brexit’ Fears

The UK pound has continued its strong performance against major currencies, despite growing fears of the UK leaving the European Union (EU), with the referendum scheduled for June 23.

So far today GMT, the pound has fallen to buying $1.442 from $1.446, but is still trading strongly against the greenback, and sterling is the highest it has been against the dollar since the middle of February.

Fears over the value of the pound, due to the uncertainty over the outcome of the referendum, has been allayed for now.

This is attributed to the dovish announcements for the Federal Reserve to hold interest rates between 0.25% and 0.5%.

And the forecast at the end of last year to increase rates four times throughout 2016, has been cut to a possible two hikes in interest rates.

Against the euro, the pound has also began the day by falling to buying EUR 1.28, although this is only a slight depreciation from purchasing at EUR 1.282.

Since the end of last week, the pound has appreciated on the euro, jumping up from buying just over EUR 1.27.

CBI Report Highlights EU Exit Dangers

A report commissioned by the influential Confederation of British Industry (CBI), has concluded that an exit from the EU would cause a ‘serious economic shock’, for the UK.

The lobby group said that there would be “negative echoes”, which would be prolonged for many years.

The cost to the British economy could reach up to 5% of the total of GDP, resulting in 950,000 jobs being lost by 2020.

Pricewaterhouse Coopers, who carried out the report for the CBI, also said negotiations for trade deals would prove difficult and time consuming, in the event of a ‘Brexit’.

The accounting firm also concluded that if Britain voted to stay in the EU, the average annual GDP growth between 2016 and 2020 would be 2.3%.

Comparatively, this is more prosperous, than the 1.5% of economic expansion under a free trade agreement with the EU, and 0.9% growth  if the UK agreed a deal as a World Trade Organisation member.

EU28 Current Account Surplus €14.3 billion for January

All of the EU member states have an aggregate current account surplus of EUR 14.3 billion in January, according to a first estimate from Eurostat.

The figure was down from the surpluses of EUR 17 billion in December 2015,  and the latest data revealed a smaller year on year EUR 21.4 billion in January 2015.

The surplus of the goods account grew in January compared to December, with an increase EUR 13 billion  compared with 12.1 billion, Eurostat said.

There was a decrease in the services account surplus, which dropped to EUR 11.9 billion, in January, from EUR 13.1 billion.

And the deficit of the primary income account increased to minus EUR 3.7 billion, compared with a minus EUR 0.9 billion in December.

Over a 12 month period up to the end of January this year, the cumulated current account, climbed to an excess  of EUR 181.2 billion.

A favourable figure when compared with EUR 138.2 billion for the 12 months leading up to January 2015.

Analysts Advising Traders To Sell Gold Into The Rally

Gold soared after the Federal Reserve held rates and policy on Wednesday and continued to rally through Thursday adding an additional $35 to trade at 1265.10. Silver soared 776 points to trade at $16.00. Platinum enjoyed the same rally gaining $26 to trade at 985.20.  Gold remains sharply higher after perceived dovishness from the Federal Open Market Committee Wednesday, although some near-term profit-taking may cause the rally to fade after the sharp run-up in prices, said Mitsubishi.

gold after FOMC

The Fed left U.S. interest rates unchanged, as expected. The gains in gold were largely attributed to the individual projections of Fed members, which collectively show policymakers now expect to hike rates only twice this year, rather than the four increases seen back in December, Mitsubishi explained.

“This once again confirms the ‘lower for longer’ outlook for U.S. rates and suggests an environment in which the opportunity cost of holding non-yielding precious-metals investments is extremely low,” Mitsubishi added.

A slide in the dollar on the news sparked the surge, though what was even more important, said Commerzbank, was the fact that the Fed signaled that it no longer plans to raise interest rates quite as steeply this year as indicated in December.

Only two rate hikes are likely this year as opposed to the four hikes previously predicted, the Fed indicated.

gold

One wrinkle for gold fans is that inflation is starting to tick up and was running at 2.3% in the US in February, its highest level in nearly four years.

That could up the pressure for more rate hikes, but the German broker said that in moderation it should not preclude gold going higher.

With the SPDR Gold Shares the world’s largest physically-backed gold exchange traded fund, up nearly 19% year-to-date and ranking as this year’s top asset-gathering ETF, perhaps it is not surprising that there is a growing chorus of naysayers claiming that now is the time to sell gold and gold ETFs.

commodity price charts

A potential problem for gold this year is that some market observers believe the Fed charting a course for more rate hikes, though at a measured pace, in 2016 sets the stage for further upside in the U.S. dollar. Of course, that would be punishing for gold and other commodities, which are denominated in dollars. Negative interest rates throughout the developed world are also seen as a catalyst for gold upside.

However, that issue was quelled a bit Wednesday when the Fed, as expected, did not raise interest rates. More importantly, it looks as though the central bank will only raise rates, at the most, twice this year. Heading into 2016, many market observers expected four rate hikes, which could have been damaging to gold’s potential upside.

Still, gold critics are advocating selling the yellow metal here simply because of the intensity of the yellow metal’s rally in a short time frame.

Bullion’s bounce has not convinced all market observers that a sustained rally is in store. Although precious metals ETFs have recently displayed some strength, gold is still in a lengthy bear market, giving some traders pause about how much more near-term upside the yellow metal has in store.

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However, the sell gold now thesis ignores the facts that the yellow metal is well off its highs set several years and that gold entered 2016 locked in a three-year long bear market. Less than three months of rallying this year does not erase those facts.

“Precious metals — and gold, in particular — typically have lower correlations to the stock and bond markets than many other commodities, such as oil. Part of the reason is that supply-and-demand characteristics for gold are different,” adds CNBC.

Annual Inflation down to -0.2% in the Euro Area and EU

Eurostat have released depressing inflation figures for February, as the euro area and all of the EU have spiralled down into a deflationary minus 0.2%.

This is down from 0.3% that was recorded for January, although more positive than the minus 0.3% that was found for the corresponding month a year ago.

The largest upward influences on prices in the euro area annual came from restaurants and cafes  at 0.13%, rents 0.08% and fruit 0.06%.

While fuels for transport  on minus 0.49%, heating oil minus 0.24%, and gas minus 0.10%, had the biggest downward impacts.

Cyprus and Romania had the most negative rates of inflation, on minus 2.2% and 2.1% respectively, while the highest prices were found in  Belgium 1.1%, and Austria and Malta, both  on1.%.

In total, inflation fell in twenty of the member states, remained stable in one, and rose in six EU countries.

The euro area’s international trade surplus stood at EUR 6.2 billion for January, EUR 0.9 billion down compared to January 2015, with exports reaching EUR 145.3 billion, a month on month decrease of 2%.

While imports also fell by 1%, as buying goods from the rest of the world was EUR 139.1 billion. Year on year intra-euro area trade remained stable at EUR 132.5 billion.

Throughout 2015, the euro area exports of goods to the rest of the world increased  to EUR 2 043.0 billion, an increase of 5% compared with 2014.

Imports climbed  to EUR1 796.4 billion, an increase of 2%, in contrast to 2014. As a result the euro area reached a surplus of EUR 246.6 billion, a rise of EUR 64.2 billion from 2014. 

The euro area and the EU are now currently in deflationary phase
The euro area and the EU are now currently in deflationary phase

UK Pound Increases on the Greenback 

The UK pound has performed a sharp recovery against the US dollar, in the aftermath of the UK budget being announced, and the dovish statement released by the Federal Reserve’s Federal Open Market Committee (FOMC).

Currently, the pound is buying $1.43, having begun the day GMT buying $1.425, from the early hours of yesterday afternoon GMT, this represents a significant rise, as then the pound was commanding $1.405.

Markets reacted after the FOMC revealed yesterday that they will keep interest rates between 0.25% and 0.5%.

This contradicts their vision at the end of last year, after they raised interest rates, that they expected several gradual increments in interest rates this year.

The FOMC also pulled away from saying that they expected rate rises four times in 2016, and now believe only two rate rises will occur.

Also, they did not proclaim a huge amount of confidence in the US economy, expecting it to expand at only a moderate pace.

The pound appreciated on the greenback, despite the announcement yesterday from chancellor George Osborne that growth figures for the UK have been cut for the next five years.

For this year, originally the independent Office for Budget Responsibility said that growth would be 2.4%, which now has been revised down to 2%.

Also, borrowing forecasts for the UK have increased for the next three financial years, but a budget surplus has still been predicted for 2019/20.

Although the pound has fallen against the Euro, now buying EUR1.26, after beginning the early hours of the day buying EUR 1.274.

Moneycorps said in their daily report, that investors were not wholly impressed on most fronts over the budget speech, and sterling came out of Osborne’s address lower than it had gone in.

And alongside the euro, the pound had also fallen against the Yen, and the Australian and New Zealand dollars.

 

Volatility Abounds after Fed Comes Out Dovish

FEDERAL RESERVEThe U.S. Federal Reserve issued a dovish monetary policy statement on Wednesday, triggering a huge drop in the U.S. Dollar and sending foreign currency markets higher. The news also drove gold prices sharply higher and supported the already strong crude oil market. Equity market traders liked the news because it indicates that interest rates will remain lower for a longer-period of time than previously expected.

The Fed held interest rates steady and subsequently scaled back its expectations for further interest rate hikes from four to two. The central bank also cut their expectations for economic growth and inflation.

In addition to the two rate increases this year, the Federal Open Market Committee now projects just two hikes in 2017, according to the latest Summary of Economic Projections.

The Fed’s benchmark interest rate target is 0.25 to 0.50 percent. Back in December when it raised rates for the first time in nearly 10 years, Fed officials were looking to raise rates perhaps 4 times to 1.4 percent by December.

With the new projections, the FOMC now sees just a 0.9 percent funds rate in 2016 and a 1.9 percent level by the end of 2017, both reflecting cuts of half a percentage point.

Traders have already adjusted the probability of a rate hike in September to 54%. Previously, investors were pegging June as the month for the first hike this year.

Fed Watch Tool

The Fed also cut its GDP growth outlook for 2016 from 2.4 percent to 2.2 percent and reduced 2017’s call from 2.2 percent to 2.1 percent.

In its monetary policy statement, the FOMC referenced “global and financial developments (that) continue to pose risks,” language that contrasted to the December statement, which said the committee was only “closely monitoring” those conditions.

The FOMC saw household spending “increasing at a moderate rate,” while housing “has improved further.” The statement did not address the “balance of risks” issue included following some previous meetings.

Today’s monetary policy statement suggests that the Fed is adjusting to the global economy, as the market already has. It’s just too hard to raise rates when the rest of the world’s central banks are headed in the opposite direction.

Prior to the release of the statement, many investors and analysts were focusing on inflation. The FOMC continued to conclude language that it was confident inflation would gravitate toward the 2 percent goal and is lower now due largely to energy price declines. However, economic projections indicated some issues with the current pace of growth.

Committee members were split over the direction of inflation with some seeing headline inflation at 1.2 percent by the end of the year, slightly lower than the current level and down from the December estimate of 1.6 percent.

Core inflation is still expected to be 1.6 percent at the end of the year, consistent with the December projection. Core inflation projections for 2017 also were taken down a notch, from 1.9 percent to 1.8 percent.

In summary, the Fed’s economic projections were more dovish than expected. Most traders and analysts had expected a more hawkish statement after the most recent upturn in economic data. The jobs and housing numbers continue to improve, while gross domestic product is likely to come in above 2 percent, after a 1 percent gain in the fourth quarter. However, the Fed see conditions differently and are only going to consider two rates hikes this year.

Market reaction was swift today with many traders returning from the sidelines to take advantage of the fresh news. The dovish statement should keep pressure on the U.S. Dollar over the near-term which should help the manufacturing sector to improve.

Gold is also likely to benefit from the falling dollar, but gains could be limited by firmer stock prices. Traders should also look for improvements in the June 10-Year U.S. Treasury Notes and 30-Year U.S. Treasury Bonds as investment managers will be forced to make adjustments to current portfolios. Because of the inverted relationship, falling interest rates should lead to higher Treasuries.

Gold Jumps After FOMC Holds And Cuts Future Rates To Just Two

Gold surprised markets and added 1.22% after the FOMC decision. For most of the day gold was holding small losses as traders remain on the side lines. Gold is trading at 1246.20 after the decision to hold rates and policy was released. The Fed committee indicated it only expects two interest-rate increases in 2016, half as many as in its December projection.

The bank’s latest forecast sees the benchmark fed funds rate rising to 0.9% by year end vs. an earlier 1.4% estimate. The Fed also projects rates will reach 1.9% by the end of 2017 and 3% by 2018, topping out at 3.3% in the “longer run.” That’s down from 3.5%. In a statement, the central bank said “global economic and financial developments continue to pose risks” to the U.S. The Fed trimmed its estimate of GDP growth in 2016 to 2.2% from 2.4%. And inflation as measured by headline PCE is now expected to rise to 1.2% by year end, down from a prior 1.6% call. The vote was 9 to 1, with Kansas City Fed President Esther George dissenting. She wanted a quarter-point increase in rates.

According to the Wall street Journal, the Fed is keeping its benchmark lending rate steady between 0.25% and 0.50%, after raising it a quarter percentage point in December. Without committing to a timetable, officials said the next move would depend on “realized and expected economic conditions” and reiterated that it plans to move gradually.

gold after the FOMC

The central bank sees the fed-funds rate at 1.875% by the end of 2017 and 3% at the end of 2018, also lower than the last quarterly projection officials released late last year. In the long run, the Fed expects its benchmark rate to reach 3.25%, less than the 3.5% rate it saw in December.

Other data on Wednesday showed the housing market continuing to strengthen last month, with groundbreaking activity hitting its highest level in five months after being held back by adverse weather.

While the US central bank is expected stand pat at the end of Wednesday’s two-day policy meeting, stirring inflation, a steady housing sector and tightening labor market conditions have raised the probability of a rate hike in June.

fed rate increases

“While few expect the Fed to announce a policy rate hike today, further evidence of building inflationary pressures will reinforce the case for further hikes in the coming months,” said Jim Baird, chief investment officer at Moran Financial Advisors.

In trading days after an FOMC statement since Janet Yellen became Fed chair, gold exchange-traded funds (ETF) and gold miner exchange-traded funds have all traded negative.

The major gold ETFS, SPDR Gold (GLD) and iShares Gold (IAU), are both negative by on average 0.50 percent in the three days after FOMC statements dating back to March 2014. For gold mining ETFs, such as Market Vectors Gold Miners (GDX) and iShares MSCI Global Gold Miners (RING), the post-FOMC immediate return is roughly three times as bad, at negative 1.4 percent, which is not surprising, since this niche is more or less a leveraged bet on the performance of the precious metal.

But this post-FOMC trading pattern for gold hasn’t shown major swings. And in trading immediately after the Fed statement on Wednesday afternoon, in which it left rates unchanged and said it expected only two rate hikes this year, not four, GLD shares and the stock market, moved higher, while the dollar declined.

Brexit Fears Damage UK Pound

The UK pound has suffered, as concerns over the possibility of the UK leaving the European Union (EU), raised selling pressures for investors.

Against the US dollar, the pound has fallen to buying £1.41 this morning GMT, from purchasing just under $1.43 at the beginning of yesterday.

The encroaching fears about a ‘Brexit’, also resulted in GBP/EUR trading at its lowest point for over two weeks, with the pound depreciating to buying EUR1.27 today GMT, reduced from just over EUR 1.285 yesterday.

A poll conducted by the Daily Telegraph newspaper concluded that those who are in favour of leaving the EU, are more likely to get out and vote on the June 23 referendum day.

Political strategist Sir Lynton Crosby, who masterminded the surprise victory for David Cameron’s Conservative Party at the general election a year ago, concluded that the final outcome is in the balance, and believes that the most inspiring campaign will lead to victory.

FC Exchange analyst Daniel Wray, opined in his daily brief, that increasingly questions are being asked over the conditions that the UK economy will have to deal with, in the event of a ‘Brexit’.

He wrote: “The issue is that there is no precedent for an economy the size of Britain leaving the EU.”

“Government figures show 12.6 percent of Britain’s economic output is linked to exports to the EU’s 27 other members, for whom only 3.1 percent is linked to exports to Britain.”

UK Employment Figures Reveal Positive News 

Figures from the UK’s Office of National Statistics have shown that in three months leading up to January this year, there have been 116,000 more jobs created in the economy.

Compared to a year ago, 478,000 new positions have been established, and the levels of employment are now at a joint highest level since comparable records began in 1971.

A breakdown of the data for those in employment revealed that there were 22.94 million people working full-time, 302,000 more than for a year earlier.

Additionally, there were 8.48 million people working part-time, 177,000 more than a year ago.

The unemployment rate now stands at 5.1%, a reduction of 0.6% from a year ago, leaving 1.68 million people unemployed. There are 28,000 fewer who are seeking work in January, compared to August to October last year.

Production in Construction up by 3.6% in Euro Area, and Up by 1.6% in EU28 

The construction sector has increased its productively levels by 3.6% in the euro area in  January this year, in comparison to December last year, according to Eurostat.

In the EU, activity in construction escalated at the slower pace of 1.6% for the same period.

The data highlighted that progress in the sector has been made, as the figures for December showed that construction had fallen by 0.7% in the euro area, and by 0.1% in the EU.

Year on year, in January 2016 compared with January 2015, production in construction grew by 6 % in the euro area, and by 4.4% in the EU.

The rise in building construction and civil engineering, were the main influences behind the sector rising in output.

In a monthly comparison, the highest increases amongst the member states were

recorded in France by 7.3%, Germany 7 %, and Spain 2.6%.

And the largest decreases were found in Hungary with a minus 13%, Romania minus 6.4%, and Slovakia with a negative score of  6.2%.

Five UK note

Employment up by 0.3% in Euro Area and by 0.1% in the EU

The latest employment data from Eurostat has revealed encouraging trends, as the total amount of employment for the fourth quarter last year, rose by 0.3% in the euro area.

For the third quarter of 2015, employment had also risen by 0.3% for the euro area,  and for the whole of the European Union (EU).

The data  for the fourth quarter of last year were not so positive for the EU, as employment growth eased down to 0.1%.

When compared to the same quarter of 2014, employment has grown by 1.2% in the euro area, and by 1% in the EU.

After year on year rises of 1.1% and 1% in the euro area and the EU respectively, in the third quarter of 2015.

Malta celebrated the highest rise in employment figures out of all the 28 member states, with an increase of 1.7% who found new positions.

They were followed by Cyprus, where employment  rose by 0.8% , while Spain, Luxembourg, Poland, Portugal and Sweden all found increases of 0.7%.

The main decreases in job creation were found in Estonia with  2.4% fall in employment, while the United Kingdom recorded a minus 1%, and Lithuania minus 0.3%. 

Germany Reports Strongest Increase in Private Consumption Expenditure Since 2000

Private consumption expenditure in Germany has increased according to official figures, rising by 1.9% year on year in 2015, this was the strongest upsurge since the year 2000.

Consumer confidence was highlighted as one of the main reasons for the acceleration in spending, coupled with  the increase of products’ prices.

When measured against current prices including inflation, the total of  private consumption expenditure was up 2.6%, reaching 1.63 trillion euros.

At the current level of costs, households in 2015 have spent 6% more on accommodation, food and beverages.

And there has been a 3.4% rise on furnishings and household equipment.

Due to the declining heating oil prices, consumption expenditure for housing, water, electricity, gas and other fuels increased by a relatively slow 1.1%.

The Federal Statistical Office, also found that there has been a rise of 56,000 jobs in the manufacturing sector in January this year, compared to the corresponding month in 2015.

In percentage terms the increase was 1.1%, total earnings amounted to 21.2 billion euros, which was 3.5% more than in January 2015.

 Month on Month Increase in French Consumer Prices 

The National Institute of Statistics and Economic Studies (INSEE), revealed that for February consumer prices hiked by 0.3%, which was significant rise month on month, from the minus 0.1% that was found in January.

In contrast, the year on year figure was less positive, as price fell by 0.2%, the first yearly comparisons to be a negative score since March 2015.

The movements in prices year on year, are explained by the variations in the costs of energy and the service sector, according to the INSEE.

Whereas the month on month changes, have been dictated mainly by the rebound on manufacturing prices, after the winter sales had ended, and in the prices in the tourism industry over the holiday period.

Also, petrol prices continued to fall in February, while food prices remained stable.

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Industrial production up by 2.1% in Euro Area

Eurostat figures have shown that industrial production in the euro area has risen by 2.1% for January, compared to December last year.

For the whole of the European Union (EU) , growth in the sector was 1.7%.

The data was positive, as in December there were month on month reductions in industrial activity, of  0.5% in the euro area, and by a slightly greater 0.6% in the EU.

Year on year, the industrial sector expanded by 2.8% in the euro area, and by 2.5% across the EU’s 28 member states.

Capital goods rising by 3.9% was the largest contributor to the growth in the euro area, energy and non-durable consumer goods grew by 2.4%, durable consumer goods by 1.3%, and intermediate goods by 0.9%.

In the EU, the increase of 1.7%  was also achieved by capital goods rising, by 3.3%, followed by energy by 2%, nondurable consumer goods by 1.5%, and intermediate goods,  and durable consumer goods both hiked by 1%.

The highest increase in industrial production across the EU, was found in Ireland , which accelerated at 12.7%.

They were followed by Estonia 4.9%, Croatia 3.2%, and Germany 2.9%, in contrast  the largest decreases were in Malta minus 5%, Romania minus 2.3% and Finland minus 2.1%. 

Euro Begins Day Falling Against the Dollar 

The euro is currently buying $1.11, having fallen from the $1.116 at the beginning of the day GMT.

Over the weekend, the euro has experienced a slide in comparison to the greenback, since the rise in the euro following the outcome of the European Central Bank’s (ECB) Governing Council meeting in Frankfurt last week.

Selling pressures increased due to the measures announced, including a hike in the ECB’s quantitative easing programme by EUR 20 billion to EUR 80 billion per month.

LMAX Exchange FX Strategist Joel Kruger believes that the EUR/USD relationship has entered a choppy period, offering no short term directional insight.

A break and close back above 1.1219 will open the door for a retest of the 2016 peak at 1.1377, the forex company said in its daily brief.

The UK pound has started the day steadily against the US dollar, and is currently buying $1.43, where the pound has roughly remained at for the majority of  this morning GMT.

Solid UK trade data, the diminished Brexit risk, and overall improved risk appetite, have all contributed to  this latest recovery in the pound, according to Joel Kruger, FX Strategist at LMAX Exchange.

Any new headlines relating to Brexit risk, and the EU referendum, will also play a part in directing the relationship between sterling and the greenback.

Lloyds Bank PMI Survey Shows Business Output Slowdown 

The latest  Lloyds Bank Regional Purchasing Managers’ Index (PMI), for February,  has revealed that there has been a slowdown in the growth of UK business output.

The index, which measures changes in the combined output of manufacturing and services, scored a total of 52.9, down from the 52.6 that was recorded for January.

This is the lowest total the index has been for 34 months, and well below the average of 56.8 that has been reached since the end part of 2012.

Staff hiring also eased, while average prices charged for goods and services were reported to have risen only marginally.

Although the survey found that UK employment rose during February, spearheaded  by solid job creation in the East of England and London.

However, the pace of hiring eased to the weakest for two-and-a-half years,  and there were falls in employment in Wales and the North East.

BASF1

 

Gold Enters A Sensitive Week As Traders Move To Risk

Gold will enter a very volatile week at just about 1250.00 after declining at the end of the week by $21.40. Gold dipped 1.68% on Friday to end the week with a loss of 1.46% as climbing oil prices and positive sentiment pushed US equities to set records for 2016. Gold which retreated from a 13-month high Friday, suffered a loss for the week as strength in U.S. stocks, oil prices and the dollar signaled a return of investors’ appetite for assets perceived as risky.

The stock market’s recent rally is the “most obvious headwind for gold, as day traders and fast money move in to skim as much off this dead cat bounce as they can,” said Adam Koos, president of Libertas Wealth Management Group.

The S&P 500 and Dow Jones were on track to record gains for a fourth week in a row, buoyed by a rally in oil. Gold saw a volatile session on Thursday after the European Central Bank “unleashed their big bazooka and traders were finding it hard to digest all the news,” said Nadeem Aslam, chief market analyst at AvaTrade.

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“But, as the dust settles, traders do envisage that the ECB’s [decision] could help the Eurozone and the economic situations could mend,” said Aslam.

The ECB on Thursday loosened monetary policy but backed away from additional easing measures. Interest-rate divergence should continue to jostle currencies and metals as the Bank of Japan and the Bank of England hold their own policy meetings in the coming week.

euro after ECB

Supporting bullion, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose to 25.68-million ounces on Thursday, the highest since August 2014.

Physical gold demand slowed in top consumer China this week, while a strike by jewelers protesting against the imposition of a tax curbed demand in second-largest market India.

Silver rose 0.2% to $15.63 an ounce, platinum was up 0.2% at $977.60 and palladium gained 1.3% to $578.50.

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Industrial metals and mining stocks rallied as investor optimism spread across global markets in the wake of the European Central Bank’s announcement that it plans more economic stimulus.

Copper, zinc and lead paced gains in London, climbing at least 1 percent. Equities and crude oil advanced as investors embraced the ECB measures announced by President Mario Draghi on Thursday. Metal prices also got a boost after China strengthened the yuan’s fixing by the most in four months.

Global markets retreated Thursday as investors looked past an unprecedented boost to European monetary policy, focusing on rising anxiety that policy makers had lost the ability to jump-start global growth and stave off deflation.

In the U.S., the Federal Reserve’s two-day meeting next week may further illuminate the trajectory of interest rates. While traders are pricing in little chance of an increase on March 16, they have boosted the odds for later in the year. The probability of a June move is now about 51 percent, from less than 2 percent a month ago, bolstered by improving economic data, stabilizing oil prices and the comeback in equities.

Fed officials have stressed that the pace of rate increases, following December’s first boost since 2006, will be gradual and data-dependent. Reports on retail sales, industrial production and housing starts are due next week before the meeting.

US Fed Rate Increases

Euro Rises in ECB Meeting Aftermath

The euro has continued its appreciation against the US dollar yesterday, following the seismic announcements by the European Central Bank (ECB), after its Governing Council meeting.

Since the release of the raft of ECB measures to combat the deflationary slide in the euro area, the euro rose to over  $1.10, and has stayed over that threshold.

Currently, the euro is buying $1.11, a significant hike from purchasing just under $1.085 in the early hours of yesterday afternoon. The euro has reached its highest peak against the greenback in a month.

Investors will be short squeezing their euro stocks, as the currency in likely to weaken in the face of the ECB increasing the amount of quantitative easing by EUR 20 billion per month to EUR 80 billion, with corporate bonds now added to the list of assets that can be purchased.

And additionally,  the lower forecast for euro area GDP that was reduced to 1.4% from 1.7% for this year.

The ECB inflation targets are also lower than their 2% target, with their estimates that prices would increase by 0.1% this year, and 1.3% for 2017.

Daniel Wray, an analyst with FC Exchange, opined that if the ECB did not take action in such a strong manor and spaced out the move taken yesterday across a number of meetings, whilst at the same time giving forward guidance around what was to come, investors were suspicious that the EUR/USD rate would have crashed.

Investors have also been airing their concerns, around the fact that Draghi “has fired the big bazooka.”

They are worried the central bank has run out of ammunition. It is widely felt that yesterday’s actions truly reflect the depth of the ECB’s concerns about the global economy.

Meanwhile, the UK pound has begun the day against the US dollar, buying just under $1.43, and is currently buying that rate, having leapt up slightly so far GMT. 

German Consumer Prices Unchanged Year on Year 

The Federal Statistical Office have revealed that consumer prices have remained unchanged for February, compared to the same month a year ago.

The inflation rate was 0%, which is a decline from January where inflation was 0.5%.

Energy prices have been the main cause of a slide in prices in Germany, a pattern that has emerged since July 2014.

For February energy costs fell by 8.5%, a figure that was an increase in the velocity of prices reducing in this sector.

Heating oil fell by a staggering 33.6% in February year on year, with motor fuels also significantly declining by 11%.

Food prices reversed the trend on consumer prices, as they rose by 0.8% in February, in contrast to the same month for 2015.

Compared with the overall inflation rate, the prices of services in total climbed above average, rising to 0.9%. 

Inflation in Spain Falls by 0.8% 

In keeping with the current deflationary trends in the euro area, as their consumer price index declined by 0.8% in February, which was five tenths lower than what was recorded the previous month.

Whereas the Harmonised Index of Consumer Prices, decreased in the same month by 1%, a reduction of six tenths month on month.

1-1252850729oPrU

 

Euro Falls Ahead of ECB Policy Meeting

The euro has begun today depreciating against major currencies, as currency investors await the decisions by the European Central Bank (ECB), at their policy meeting in Frankfurt today.

So far GMT, the euro has fallen against the US dollar, to buying $1.09, after starting the day purchasing $1.099.

The consensus of market expectations, are that there will be an expansion or an increase, to the ECB’s  60 billion euros per month quantitative easing (QE) asset buying programme.

Moneycorps believe that the market is set for disappointment, based on the decisions made in early December last year.

As opposed to the strong and decisive action that the markets were expecting, the ECB’s judgement to cut the bank deposit rate from -0.2% to -0.3%, was not viewed by many analysts to be enough action taken.

This resulted in a 2% hike for the euro, Moneycorps said that another anticlimax would be likely to send the euro higher once again.

And warned that aggressive stimulus policy moves, is almost certain to knock a significant amount of value off the euro.

FC Exchange analyst Daniel Wray, opined that the options that are open to the ECB, include using tiered interest rates, loosening the QE restrictions originally put in place.

And buying other bond types, or reintroducing three- and -year bank loans, as was seen at the beginning of the euro area financial crisis. 

five eurosGerman Trade Balance Reveals EUR 13.6 billion Surplus 

In January 2016, official figures have shown that the foreign trade balance reached EUR 13.6 billion, EUR 2.3 billion lower that what was found for the same month in 2015.

German exports declined by 1.4%, while imports increased by 1.5%, the latest data revealed.

According to provisional results of the Deutsche Bundesbank, the current account of the balance of payments, showed a surplus of 13.2 billion euros, in January 2016.

These figures included the balances of trade in goods, including supplementary trade items which rose by 13.3 billion euros, and primary income which increased by 5  billion euros,

While services fell by 2.8 billion euros, and secondary income that also declined by 2.3 billion euros.

Germany dispatched EUR 34.3 billion of goods to euro area, a fall of 0.1%  in January 2016, and the value of the goods received from those countries was 33.3 billion euros , an increase of 2.7%.

Fitch Say Europe Credit Investors More Nervous Over Risks

Fitch have found that European credit investors have become more bearish, on a range of perceived market risks for this year.

Prolonged economic weakness was flagged as more dangerous concern to respondents, in comparison to the same survey conducted last October, as 77% compared to 36% said this was the highest risk.

The same proportion of those who were questioned, saw the threat from geopolitical risk is as high, up from 55%. While 65%  cited adverse emerging market developments as a high risk, up from 59%.

High sovereign debt was less of a worry, with 31% rating them as a major risk, nearly double the 16%  that saw them as a high risk in the fourth quarter of last year.

 

Gold Steady Ahead Of ECB

Gold is trading at $1252.30 in the Asian session after falling over $8 on Wednesday as the recovery of oil helps ease global stress levels as traders turn their attentions to the ECB meeting later today.  This price fall is synchronized with expectations that European Central Bank may ease monetary policy this week and push interest rate down, analysts said.

However, the current downfall is deemed a natural process of profit taking that will never crack gold’s role as investors’ “safe haven”, namely amid the present withering economic situation. The yellow metal is up more than 19 percent and has recently tested the $1,280-an-ounce level for the first time since early 2015. In comparison, the Dow Jones industrials index is down 2.7 percent for the year to date.

A number of factors are fueling gold’s rise. The recent cooling in the U.S. dollar. Financial volatility at the start of the year. Early evidence of rising inflation. Physical metal shortages in the futures market. And the recent experiment with deepening negative interest rates in Europe and Asia as overseas central banks respond to recent vulnerabilities with even more aggressive monetary policy stimulus.

gold

Above all, though, inflation dynamics should keep gold pushing higher as crude oil looks set to stabilize and the U.S. labor market tightens. Fed policymakers have recently been voicing increasing worry about the potential risk of expectations about prices — or where people believe inflation is headed — from low energy costs. This suggests that despite the firming up of core, or ex-energy, inflation measures, the Fed is likely to hold off on any further interest rate hikes until the second half of the year as it waits for hard evidence that that U.S. economy is bouncing back.

If so, that means the central bank could potentially fall behind the curve on inflation because monetary policy operates with a lag of around nine months. It takes time for changes in interest rates to percolate through the financial system into loan rates, affecting credit-fueled purchases and, ultimately, business revenues.

A rally by the dollar sent the gold price lower as investors waited for actions from the European Central Bank to boost the Eurozone economy. There was also a small outflow from exchange traded funds, the first in a month. Gold ETFs saw sales of 2.378 tonnes of gold from the SPDR gold ETF but purchases of 0.45 of a tonne into the Gold Trust yesterday. This is the first time we have seen sales of size from the SPDR gold ETF. It certainly helped the gold price to slip down

Gold and the dollar are still closely linked and the US currency’s lackluster start to 2016 has been one reason why gold has been so strong. Indeed, gold has enjoyed its best start to a year since 1974 something that ABN Amro like other recent bull converts expect to continue. But it adds more monetary stimulus by central banks should support investor sentiment and the overall cyclical demand outlook, “resulting in a further out performance of the cyclical precious metals compared to gold this year and next year.

us dollar

With Draghi shortly to announce more stimulus measures, skeptics are having their day. After all this time and after so much monetary stimuli has been injected into the Eurozone the results have been disappointing, so will larger negative interest rates and more QE do any better? What have been the results to date? Even after the central bank pumped about €720 billion into the region, manufacturing dropped to its lowest level since 2013, the inflation rate turned negative, and consumer confidence worsened.

Euro Slips Against the US Dollar in Uncertain Period

The euro has depreciated against the US dollar, falling to buying $1.097 this morning from a peak of $1.1 in the early hours of today GMT.

Selling pressures are likely to have increased on the euro, as there is ambiguity over the course of action that the European Central Bank (ECB) will take at their policy meeting, which will take place in Frankfurt tomorrow.

The is despite the positive GDP data that was released yesterday by Eurostat, especially the 1.6% productivity rise year on year in January 2016.

Analysts at Societe Generale believe that risk aversion is failing to support the euro, and it’s trading less like the yen, amid the concerns about immigration and ‘Brexit’.

That gives the ECB a greater chance of driving it lower if they deliver easier policy tomorrow, they have not given up hope of a test or even a break of EUR/USD 1.08, even though it will take a ‘Brexit’ to get EUR/USD to parity this year, the investment bank said.

The UK pound has suffered a turbulent relationship with the greenback over the past 24 hours, this morning GMT falling to buying $1.418, before spiralling upwards to $1.424.

Reviewing the comments from Bank of England Governor Mark Carney yesterday at the Treasury Committee meeting at the UK parliament, Societe Generale analysts said that suggesting financial instability if the UK was to leave the European Union (EU), is not really taking a partisan view.

‘Brexit’ may be the more desired outcome for many British citizens the bank opined, , but it is also likely to make them poorer.

To point that out isn’t to take sides, any more than suggesting that GBP/USD will trade below 1.30 as a result of the UK leaving the EU. 

Germany Increases Manufacturing Turnover by 1.1% for January 

According to the Federal Statistical Office, the German manufacturing sector saw a rise of 1.1% in turnover for January, when compared to December last year.

Despite the upturn, the growth figures for the sector has eased month on month, as for December 2015, as there was a turnover rise of 2.1%, in contrast to November.

In January 2016, domestic turnover increased by 2.2%, business with foreign customers was at the level of the previous month.

Sales to euro area countries were 0.8% below December, and sales to other countries 0.5% above the preceding month’s level.

Compared to January 2015, there has been a rise of 1.5% in real turnover, having been adjusted for annual working day variations.

Domestic sales increased b 1.8%, while turnover from business with foreign customers rose by 1.3%.

Transactions with euro area countries increased by 3.9%, while turnover with other foreign countries declined by 0.6%, year on year.

Mixed Data in Spanish Economy 

Official figures have revealed that 9,443 more companies were created in Spain in January this year, representing a significant rise of 14.7% from the same month in 2015, while 3.017 companies have been dissolved.

While for the fourth quarter of last year, house prices were reduced by a tenth, when compared to the previous quarter.

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GDP up by 0.3% in the Euro Area and by 0.4% in the EU

Eurostat figures have revealed that GDP rose by 0.3% across the euro area, and by 0.4% in the European Union (EU), in the fourth quarter last year compared with the previous quarter.

In comparison with quarter on quarter growth from the third quarter of last year, the data is stable, as growth rates were the same for the euro area and the EU.

Whereas GDP year on year rose by 1.6% in the euro area , and 1.8% for the whole of the EU.

For the whole of last year, growth reached 1.6% in the euro area and by 1.9% in the EU, an improvement compared with 0.9% and 1.4% respectively in 2014.

The main contributions to GDP growth, arrived from a 0.2% rise in household expenditure in the euro area, which rose further by 0.4% in the EU.

Exports also grew rose by 0.2% in the euro area and by 0.5% in the EU, while. imports increased by a wider margin, at 0.9% in the euro area and by 1.1% in all the EU member states.

The highest quarter on quarter growth figures were found in Sweden on 1.3%, Estonia, 1.2%, Poland and Romania both recorded on 1.1% growth,  while Hungary and Slovakia were both 1%.

In contrast, the largest decreases were disclosed in Croatia by 0.5%,  and Latvia 0.3%.

Out of the traditionally most powerful European economies, Germany was stable quarter on quarter with growth on 0.3%.

This figure was matched by France, who also remained on 0.3% quarter of quarter growth, while UK expanded by 0.1% to 0.5% GDP.

Euro climbs on US Dollar 

The euro has enjoyed a resurgence against the US dollar so far this morning GMT, and has reached to buying $1.10, and has been on that level for most of this morning.

Compared to yesterday, this has been a sizeable climb from buying $1.094 just before noon.

Analysts from LMAX Exchange, believe that the euro has been able to rise against the greenback, as the market has priced in an expected 10 base point reduction in bank deposit rates, at the European Central Bank’s (ECB) policy meeting in Frankfurt on Thursday.

The market is seemingly not expecting much more from the ECB, LMAX Exchange opined, even though it has been widely tipped that an expansion of their quantitative easing programme will be announced at the gathering. 

The UK pound has also appreciated against US dollar, moving up to buying $1.42 this morning GMT.

Following the euro, the pound has steadily climbed upwards against the buck, after noon yesterday sterling was purchasing $1.414.

The markets have acted positively to the statement from the Bank of England (BOE), about their plans to increase liquidity by issuing three extra Indexed Long-Term Repo (ILTR), in the weeks before and after the EU referendum on June 23.

Usually the ITTRs  is a  monthly programme, and works by allowing commercial banks to borrow liquidity from the  BOE, against the collateral of their mortgage or other assets.

The measure has been put forward, in the attempt to shield the UK economy from the potential of damaging economic uncertainty over the referendum, especially if the British public votes to leave the EU. 

Industry Production Increases in Germany by 3.3% 

According to official figures, production in German industry hiked by 3.3% for January this year.

This is a significant month on month increase, as in December the figures revealed that there had been a fall on 0.3% of production output.

Excluding energy and consumption, industry rose by 3.2%, additionally the production of capital and consumer goods escalated by 5.3% and 3.7% respectively.

There was also higher activity in the production of intermediate goods by 0.4%.

Energy production was up by 0.1% in January,  and growth in the construction industry increased by 7%.

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Oil Prices Rally As Traders Seem Confident Of Production Cuts

crude oil bouncingCrude oil rocked as the week opened to trade at 37.70 gaining $1.80 while Brent oil soared over the $40 price as OPEC members were optimistic about an agreement to cut production at their March 20th meeting. The surge in oil prices helped reverse Wall Street’s early losses to turn the Dow and the S&P into positive territory. The NASDAQ remained in the red.

A portion of the gains could be attributed to U.S. energy companies cutting oil rig counts for the eleventh-straight week to the lowest level December 2009.

“The market is getting more bullish as the damage caused by the oil price crash is becoming apparent and is forcing the market to look beyond the current glut to a world with falling production,” said Phil Flynn, senior market analyst at Price Futures Group, in a note. “The bulls have regained control of this market that is now up 40% from its 2016 lows.”

The United Arab Emirates’ energy minister said that current prices are forcing all suppliers to freeze their production.

crude-oil-exhibit-1

“It doesn’t make any sense for anyone to increase the production with the current prices,” Suhail al-Mazrouei told reporters on the sidelines of an aerospace conference in Abu Dhabi. “This is all good news for balancing the market. We just need to be patient.”

Hopes of an improving global outlook and stronger sentiment for a recovery in turbulent markets saw the price of a barrel of Brent crude rise close to $41, its highest level for nearly three months.

oil prices

The price tumbled close to $27 in January, its lowest level since 2003, amid a glut in oil supply and slowing world demand as the global economy stuttered.

The fall left it more than three quarters off its peak of more than $115 in the summer of 2014 and was accompanied by a turbulent period in stock markets.

President Hassan Rouhani said on Monday that his administration is running the country with $25-dollar oil.

Addressing a crowd of people in the southern city of Yazd, Rouhani said that his administration has overcome many economic problems in the country despite the fact that other oil producers are facing serious economic ordeals, IRINN reported.

“The Iranian administration has kept the value of the national currency unchanged despite a sharp decrease of crude oil prices,” Rouhani said.

He also criticized the administration of former president Mahmoud Ahmadinejad for mismanagement, saying while the country’s oil revenues hit $120 billion no serious steps were taken by the administration regarding employment.

brent oil

Even if Saudi Arabia wins its struggle with U.S. shale producers over market share, it will face a new billion-barrel adversary.

It won’t be regional nemesis Iran, a resurgent Iraq or long-standing competitor Russia. The answer will be more prosaic: Even when overproduction ends, a stockpile surplus of more than 1 billion barrels built up since 2014 will remain, weighing on prices. Inventories will keep accumulating until the end of 2017, the International Energy Agency forecasts, and clearing the glut could take years.

Saudi Arabia repeated last week that it won’t speed up the re-balancing process by reducing its own supply. While the kingdom and some other OPEC members have agreed with Russia to freeze output at January levels, a coordinated cut is “not happening,” Saudi Oil Minister Ali al-Naimi said

russian oil production forexwords