Daily Forex Fundamental Overview

Fundamental Analysis

EUR

“We have tailwind for the euro-zone economy like rarely before with a combination of cheap oil, a weaker euro and extremely low financing costs.”

- Berenberg

Deflationary pressure in both Germany and Spain eased in March, helped by recovery from the sharpest slump last year amid falling oil prices. Consumer price index in the fourth largest economy of the Euro zone was released ahead of expectations, declining 0.7% on the annual basis, against a forecast of a 0.9% drop and up from a 1.2% decrease in February. Alongside, German annual inflation came out at 0.3% this month, up from 0.1% in February and in line with the majority of analysts’ predictions. The data is pointing on easing negative effect provided by slump in crude oil prices over past nine months. In addition to that, inflation expectations seem to be improving amid the recently-launched QE programme by the European Central Bank, with manufacturing activity and labour markets rebounding as well.

Meanwhile, economic sentiment in the common currency bloc gained further ground and hit its strongest level in more than three years. The reading of consumer confidence, calculated by the European Commission, advanced to 103.9 points in the current month from 102.3 in the preceding month, the biggest mark since June 2011. Additionally, a positive change was also registered by other statistical indicators in the Euro area, including business climate, industrial confidence and sentiment in the services sector of the monetary union’s economy.

USD

“Employment is looking firm, which is very supportive of spending. Faster wage growth would be the real silver bullet that’s been missing.”

Consumer spending in the US advanced less than expected in February 2015, indicating that economy may be losing momentum after several quarters of strong growth. Personal expenditures gained 0.1% last month; however, it has been a first rise in three months, which followed a downward change of 0.2% and 0.3% in January and December, respectively. The worse-than-estimated result can be explained by cold weather and snowy winter in Northeast and Midwest of the country, which emptied malls and car dealers. Consumer sentiment, which is directly connected to future spending decisions, may considerably change the direction the American economy is moving in. Services sector is accounting for the biggest share of US GDP, with more than 70% of it depending on domestic demand. Still, climbing payrolls and falling unemployment are likely to have a general positive impact on the economy in the medium-term.

Another important topic, especially for US monetary policymakers, is incomes’ growth. Last month salaries jumped 0.4% on a monthly basis, more than 0.3% projected by analysts and up from a 0.3% rise in January. Wages is one of the key issues for the Federal Reserve, which is going to make future decisions on interest rates, based not only on consumer price developments, but also on labour market situation and wage tendencies.

GBP

“The rise in mortgage approvals to a 6-month high supports the belief that housing market weakness has bottomed out and activity is now gradually turning around.”

- IHS Global Insight

Mortgage approvals in Britain surged to their highest level in six months in February of this year, gaining value a third consecutive month in a row. The Bank of England’s data is therefore suggesting that property market in the country is finally starting to regain bullish momentum, after some period of weakness. Approvals for new housing credits climbed to 61,760 last month, up from 60,707 in the preceding month. The result exceeded analysts’ expectations for a rise up to 61,500. Some negative effect on a number of new mortgage approvals came from new government rules earlier last year. At the moment, it is required for banks for more detailed and deeper checks on whether potential borrowers are able to afford buying a new home. On the contrary to that, UK government launched a broader support programme for first-time home buyers, intended to support new families and hold positive momentum at the property market of the country. Now, the state will contribute as much as 25% to the first deposit payment for purchasing new property.

In the meantime, growth in consumer credit lending in Britain cooled down slightly in February. In total, the indicator advanced by 740 million pounds, less than 900 million pounds estimated by economists. Nevertheless, the pace of expansion remains optimistic, with consumer credit growing at an annual pace of 6.6%.