Daily Forex Fundamental Overview

Fundamental Analysis

EUR

“Despite the cacophony and erratic leaks and statements in recent days from the other side, I remain firmly optimistic that there will be an agreement by the end of the month”

- Alexis Tsipras, Greece’s Prime Minister

Greek Prime Minister Alexis Tsipras said he was "firmly optimistic" the government would reach an agreement with European creditors by the end of April. Tsipras admitted several points of agreement had been found since negotiation first began, especially on aspects such as tax collection, corruption and plans to distribute the tax burden on those, who have the ability to pay. Yet, he acknowledged that the parties disagreed on four issues including labour issues, pension reform, an increase in value-added taxes and privatization. His comments came after suggestions from European partners that a deal to unlock the release of Euro zone loans that Greece desperately needs to stay afloat is unlikely next week and that Greece risks depleting its cash reserves and defaulting on debt payments.

Meanwhile, the Standard and Poor's rating agency downgraded Greece's credit rating further into junk status Wednesday, adding the country's financial commitments would be unsustainable without "deep economic reform or further relief." The agency brought Greece’s sovereign rating to CCC+ from B-, with a negative outlook "given the risk of further worsening in liquidity for the sovereign, the banks, and the economy." S&P also said Greece's solvency depends increasingly on business, financial, and economic conditions.

USD

“Layoffs in the manufacturing and energy sectors were reported in multiple Districts including Cleveland, Atlanta, Minneapolis, Kansas City, and Dallas”

- Federal Reserve

The world’s number one economy surprised with soft economic data, raising concerns about the economy’s ability to rebound from a weak patch hit in the beginning of the year. According to the US Commerce Department, the number of building permits issued in March plummeted by 5.7% in March to a seasonally adjusted 1.039 million units down from February’s total of 1.102 million. Analysts, however, had predicted building permits to decline by 2.0% to 1.080 million units in March. In addition to that, the report showed that US housing starts climbed by 2.0% in March to a seasonally adjusted 926,000 units from February’s total of 908,000 units, against expectations for an advance of 15.9% to 1.040 million.

Separately, the number of Americans who filed for unemployment benefits rose last week compared to the previous week. Initial jobless claims across the country increased to a seasonally adjusted 294,000 in the week ended April 11, according to the Department of Labor. Economists, however, had expected claims slipping to 280,000 last week. The four-week moving average of claims, considered a better measure of labour market trends as it strips out weekly volatility, rose 250 to 282,750 last week. Claims below 300,000 are associated with a strengthening labour market. Meanwhile, continuing claims for the week ended March 28 came in at 2.268 million, compared to previous week's revised reading of 2.308 million.

AUD

“Today's figures and revisions to recent months paint a healthier picture of the labor market than expected”

- Riki Polygenis, co-heard of Australian economics at ANZ Research

Australia’s unemployment rate unexpectedly dipped, as the economy added a surprisingly strong number of jobs. The jobless rate declined to 6.1% in March, compared with a revised 6.2% in the preceding month, according to the Australian Bureau of Statistics. Economists, in contrast, had called for an increase to 6.3%. The total number of people with jobs increased 37,700 to 11.72 million in March, more than double the amount analysts had expected. Full-time employment soared by 31,516, while part-time jobs increased 6,148. On top of that, the labour force participation rate ticked up to 64.8% in the reported month from a revised 64.7% in February, suggesting the number of discouraged job seekers is falling. According to the RBA forecasts, the unemployment rate will reach 6.5% in 2016 before falling towards 6% in 2017.

Unemployment in Australia has hovered around 6% for the last year, hitting its highest level in more than 12 years in July at 6.4%. The increase in joblessness has largely been driven by the sharp decline in resource-sector investment over the last few years due to plummeting commodity prices and weaker demand from China, Australia's top export market. Thus, the data will alleviate the pressure on Joe Hockey, Australia’s Treasurer, who has been facing increasing calls to wind down cost-cutting in May’s budget in favour of more measures to underpin growth.

NZD

“Comments from respondents remained more positive (60 percent) than negative (40 percent), although a number of those that provided a negative influence mentioned the increased value of the New Zealand dollar, in particular against the Australian.”

- Catherine Beard, Business NZ's executive director for manufacturing

New Zealand’s manufacturing sector continued to grow for the 30th month in a row in March. The Business New Zealand Performance of Manufacturing Index slid slightly to 54.5 in March from a revised 56.1 in the preceding month. A reading above the 50-mark threshold indicates an expansion in the sector. The gauge was last seen in contraction more than two years ago. Of the five diffusion indexes that constitute the headline reading, only production climbed to 55.1 from 52.6. Employment, however, slid to 49.5 from 52.3, the second time in four months it has declined, while new orders fell to 57.4 from 61.4. Finished stocks declined to 53 from 54.2 and deliveries dropped to 54.9 from 58.

The sustained growth in New Zealand's factory sector is yet another sign that the nation’s economy is on a solid footing, supported by robust construction activity and record immigration levels. In addition to that, the latest Quarterly Survey of Business Opinion conducted by the New Zealand Institute of Economic Research showed confidence in manufacturing rose, building intentions reached the highest level ever, and plant and machinery intentions hit their highest level since September 1994. As long as confidence levels remain high, companies will be willing to hire and invest, which bodes well for the rest of the economy.