Daily Forex Fundamental Overview

Fundamental Analysis

EUR

“These numbers – the Ifo today and the euro zone PMI yesterday – show momentum for the region as a whole is strengthening.”

- Morgan Stanley

Economic recovery in the Euro zone seems to be gaining more growth momentum. This is clearly proved by improving indicators, such as yesterday’s PMI and today’s Ifo Business Climate Index for Germany. Taking into account data for the latter one, which was released on Wednesday, it showed a significant climb in sentiment of businesses in the Euro area’s largest economy. The Ifo Index jumped to 107.9 points this month, up from 106.8 points in February. Analysts have forecasted the indicator to add slightly less value to reach 107.3 points. Alongside, economists are underlying positive impetus from the European Central Bank’s one trillion euros expanded asset purchases programme and weaker exchange rate of the euro, which helps to underpin investors’ sentiment. Some of them are also saying that Germany is recovering back as the regional powerhouse for the whole Europe.

In addition to that, French business climate advanced to its highest level since April 2012, raising hopes that the second-biggest economy of the monetary union is finally emerging from long-lasting stagnation. The benchmark business morale index increased two percentage points to 96 last month. Moreover, sentiment in industrial sector remained at even higher level of 99 points.

USD

“One can ascribe some of that to the strong dollar -- you would expect to see machinery and other forms of manufacturing equipment demand weaken somewhat.”

- TD Securities

Orders for durable goods in the United States have surprisingly slipped in February of the current year, even though the majority of analysts predicted this statistical indicator to increase slightly by 0.2% on month-to-month basis. A decline reached 1.4% last month and followed a downward-revised 2% gain in the preceding month. Moreover, orders for non-military capital goods that exclude transportation items diminished as much as 0.4%, after a zero growth in January, which initially used to be positive at 0.3% but was also revised to the negative side. For the core indicator it was the sixth consecutive month with worse-than-estimated data released, while in five out of six times core orders were falling down on a monthly basis.

Experts are discussing some potential factors that could negatively weigh on orders for goods with a period of use of more than three years. Among them, slowdown in global economy is providing American producers with negative impetus, and US growth alone is not enough to carry weakness abroad. Apart from that, economists see unfavourable impact from stronger US Dollar. As a result, American-made goods are becoming less attractive outside the US, and foreigners are switching to buying products from elsewhere, rather than the United States.

GBP

“The increase in mortgage approvals [between January and February] is welcome news and a sign that the housing market is beginning to improve.”

- British Bankers’ Association

The total number of new approvals for receiving mortgages in the United Kingdom increased in February of this year, by reaching the biggest level in five months. All in all, UK banks approved 37,305 new housing loans last month, up from 36,500 registered in the beginning of the year. However, annual data for this indicator continues to disappoint. Judging from year-to-year numbers, released by the British Bankers’ Association, approvals for property purchases declined 20.2%, from 46,785 seen in February of the previous year. Alongside, a decrease in total value of new house loans amounted to somewhat lower 16.1%, partly positively offset by an increase in property prices across the country. Data has also showed a slump in a total number of all type of loans approved by British banks, down from 76,938 to 61,361 this February.

At the same time, BBA generally sees optimistic signs that a recovery is beginning to taking place, as consumers take advantage from competitive deals that are available at the moment. Britons are also becoming more confident to make long-term purchasing decisions as economy is getting back on track with the fastest GDP increase among G7 countries. Moreover, the UK government has set out additional plans to support those who are planning to buy their first homes. Last week, UK Chancellor of Exchequer George Osborne announced that the government will contribute 25% to deposits that should make a first payment for a new home purchase.