Disappointing data from the Eurozone

So this Euro crisis seems to be far from over, when we need the world economies to recover, it seems that the crisis in the Eurozone is still waiting for a serious resolution…


Two forces led to a dropdown in the EUR/USD in the past week.

This includes the disappointing data regarding the German economy and the estimations that the “Troika” representatives will postpone passing the next payment to Greece until the end of November.

Obama’s election for a second term as the U.S. President didn’t change the dropdown, despite the fact that Obama supports Bernanke’s expansionary monetary policy, which theoretically supports the weakening of the Dollar.
We note negative economic data regarding the German economy: a sharp decline in orders from factories, in the volume of industrial production, and September’s export volume.

Along with that, the EU commission had reduced Germany’s growth forecast for 2013 sharply, to only 0.8% compared with 1.7% in previous forecast from May.

The ECB president mentioned in his speech in Frankfurt last week that the debt crisis begins to impact German economy, which so far managed to avoid the severe consequences of the crisis.


We note that retail sales declined in September sharply than expected (-0.2% to a level representing a yearly change of -0.8%), evidence for consumers’ pessimism in Europe.

The EU commission cut the Eurozone’s growth forecast for 2013 sharply, to only 0.1% compared with a previous forecast of 1% and a -0.4% growth in 2012.

In addition, ECB president expressed several times his pessimistic estimations regarding the growth rate of European economy in the next year.

Much to investors’ disappointment, ECB president, Mario Draghi, did not provide more details about the new bond-purchasing program (as part of the last interest rate press conference).

Such details would be, for example, if there’s an intention to purchase bonds of countries in distress until debt yields reach a certain level, and what’s the target yield.


In addition to the negative data, the EU representative’s remark supported the risk premium rise in financial markets as well.

According to the representative, despite the approval of the new austerity plan, European leaders are expected to wait for the full “Troika” report examining the progress of the reforms in Greece, before they take the decision whether to pass the next payment to the country.

We mention that the funds amount 31.5 billion Euros, which have been frozen since June.

The decision probably won’t be made in the next meeting of the European leaders as planned (12 November), but will be postponed to late November.


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