FOREX TRADING

Euro Area Lacks Fundamentals, but We Are Waiting for Some Good News Later This Week

A new week had started, and our concerns remain the same of the surging unemployment rates and low consumer prices, undershooting the ECB comfort zone affected by the ongoing weaknesses in the sixteen nations from curbed spending and weak confidence levels. We are sure that the euro area finally emerged from the worst recession since the euros establishment, but the ongoing downturns taking place from various sectors would diffuse back some clouds in our skies.

With all the actions taking place and improvements we can only say that the European Central Bank is in the waiting status, abstaining from taking further actions such as reducing or manipulating the benchmark rate along with other instruments waiting to see the effect of the previously injected aids. Because After all the taken measures by the Central Bank, improvements started to float on the surface brightening our outlook further giving out hopes to the businesses teetering on the brink of destruction.

Joining other the ECB had reduced the benchmarks in a narrow period of time down to a historic low of 1.0%, but it abstained from heading toward the Zero barrier like other banks as they almost reached the Zero. A conclusion from the prolonged studying of markets, the ECB committee decided not to reduce the benchmark further fearing any spur of inflationary pressures in the future resulting from the ongoing money injection, along with easing policies. Moreover, the bank wanted to have a spare instrument to be used if the downturn persisted even with the continuous measures.

To confirm the status of ECB committee, we’ve seen last week consumer prices head back to the positive zone on the month, rising 0.3% inline with projections recovering from the vast fall seen in July to -0.7%. However, the yearly consumer prices held steady at -0.2% but it remained better than the revised previous -0.7%, and the yearly Core CPI held steady at 1.3% in the ECB comfort zone. Therefore, slow steps taken by the Trichet and his committee are currently working well with the euro area where prices and improvements will take place in the upcoming period.

On the other hand, we are waiting later this week more confirmations that the manufacturing sector is about to head back into an expansion and the PMI services is currently witnessing an expansion. As those improvements ensure the ongoing projections that an expansion took place in the third quarter of the current year ending the five contractions seen previously.

Therefore, we end today with complete silence and some pessimism that share prices outpaced the companies’ earnings, yet we can’t really deny the general optimistic outlook of a recovery in the sixteen nations.