Daily EUR/USD Fundamental Analysis for April 2, 2012

Daily EUR/USD Fundamental Analysis for April 2, 2012

By FXEmpire.com – Analysis and Recommendations:

The EUR/USD ended the week, the month and the quarter on a surprise note, closing at 1.3332 gaining strength after Euro-zone finance ministers meeting in Copenhagen agreed to temporarily boost the size of the firewall designed to contain the spread of the region’s debt crisis to 800 billion euros ($1.1 trillion) from a previously planned 500 billion euros.

International Monetary Fund Managing Director Christine Lagarde on Friday said she welcomed the decision by euro-zone finance ministers to temporarily boost the effective lending capacity of the region’s bailout funds to 700 billion euros.

Spanish government bond prices added to gains Thursday, pushing down yields, after Spain announced 27 billion euros ($36 billion) of austerity cuts in its 2012 budget.

Ending the month, the US issued several economic reports all had positive sentiment, but the USD was unable to muster strength against the euro after the Copenhagen agreement.

Greek Prime Minister Lucas Papademos on Friday said the country was working to ensure it won’t need a third bailout but said the potential need for further aid couldn’t be ruled out, news reports said. “Some form of financial assistance might be required.

France posted a 2011 budget deficit equal to 5.2% of gross domestic product, coming in under the government’s initial target of 5.7%, French President Nicolas Sarkozy reported.

Inflation in the 17-nation euro zone slowed to a 2.6% annual pace in March, down from 2.7% in February, the European Union statistical agency Eurostat released today.

In the US, consumer sentiment in March reached the highest in more than a year, as consumers grew more confident about their current economic conditions.

The University of Michigan said the final reading for the consumer-sentiment gauge in March hit 76.2 — the highest since February 2011. Last month sentiment was at 75.3.

The Chicago PMI, or Chicago business barometer by its formal name, decelerated in March but marked its fifth straight month above 60%. The PMI fell to 62.2% in March from 64.0% in February,

Americans spent money in February at the fastest pace in seven months, but a good chunk of their cash went to pay for higher energy costs and incomes rose at a much slower clip, government data showed.

Personal spending jumped 0.8% in February as personal income edged up 0.2%, the Commerce Department said.

With income growth unable to keep up, the faster pace of spending in the first two months of 2012 pushed down the personal savings rate to 3.7% in February from 4.7% at the end of 2011. That’s the lowest savings rate since August 2009.

The euro jump seems to be an overreaction by investors, and the markets should see a correction developing on Monday, pushing the euro under the 1.32 level.

Economic Events for Monday, April 2, 2012 Europe and America

08:15 CHF Retail Sales (YoY)

Retail Sales measure the change in the total value of inflation-adjusted sales at the retail level. It is the foremost indicator of consumer spending, which accounts for the majority of overall economic activity.

08:30 CHF SVME PMI

08:50 EUR French Manufacturing PMI

08:55 EUR German Manufacturing PMI

09:00 EUR Manufacturing PMI

09:30 GBP Manufacturing PMI

Manufacturing Purchasing Managers Index (PMI) measures the activity level of purchasing managers in the manufacturing sector. A reading above 50 indicates expansion in the sector; a reading below 50 indicates contraction. Traders watch these surveys closely as purchasing managers usually have early access to data about their company’s performance, which can be a leading indicator of overall economic performance.

10:00 EUR Unemployment Rate

The Unemployment Rate measures the percentage of the total work force that is unemployed and actively seeking employment during the previous month. The data tends to have a muted impact as there are several earlier indicators related to labor conditions in the euro zone.

15:00 USD ISM Manufacturing Index

The Institute of Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI) rates the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories.
The data is compiled from a survey of approximately 400 purchasing managers in the manufacturing industry.
On the index, a level above 50.0 indicates industry expansion, below indicates contraction.

Government Bond Auctions (this week)

Apr 03 09:30 Belgium Auctions 3 & 6M T-bills

Apr 03 09:30 UK Conventional Gilt Auction

Apr 04 08:30 Spain Bono auction

Apr 04 14:30 Sweden Details T-bill auction on Apr 11

Apr 05 08:50 France OAT auction

Apr 05 15:00 US Announces auctions

Apr 05 15:30 Italy Details BOT on Apr 11 & BTP/CCTeu on Apr 12