Daily Forex Fundamental Overview

Fundamental Analysis

EUR

“The government is fully confident that it can bring its public deficit below 3 percent in 2017, while helping the economic recovery.”

- French Finance Minister

France has unexpectedly decreased its budget shortfall in 2014, while analysts expected the weakened country’s economy to have more negative impact on public finances. The fiscal gap in the Fifth Republic slumped to 4% of GDP last year, down from 4.1% in 2013 and lower than 4.4% initially predicted by the government. According to the French Finance Minister Michel Sapin, many local authorities managed to decrease their negative budget balances, thus positively contributing to the overall situation. He added that the government has also improved its forecast for the deficit in 2015, revising it down from 4.1% to 3.8% of GDP. Moreover, after growing just 0.4% during previous year, country’s economy is now estimated to gain more than 1% this year. However, French negative fiscal gap is still higher than the EU requires it to be at maximum 3% from GDP. Recently, the European Commission has extended the penalty-free period for France to decrease its deficit down to the benchmark until 2017.

At the same time, on Thursday the market research group GfK published its consumer climate index for Germany. It showed a stable positive development and an increase from 9.7 points this month up to 10 points for April. All sub-indicators, including income and economic predictions and readiness to buy strengthened, therefore giving further signs of economic expansion.

USD

“Claims persisting below 300,000 have been historically “associated with strong payroll growth. That suggests that labour market conditions are relatively tight, which is needed to support wage growth.”

- Jefferies LLC

The total number of claims for unemployment benefits in the United States dropped more than expected for the previous week ended March 21, as brightening economic outlook for the world’s biggest economy is having a positive impact on job creation and decreases the number of lay-offs. In total, 282,000 Americans filed applications for jobless benefits during the weekly period, down from 291,000 a week before. Analysts, in turn, waited for completely no changes in this statistical indicator. Falling unemployment claims usually coincide with higher levels of hiring; therefore, the upcoming reports on payrolls should reveal a continuous improving situation. Employment is also one of the most important signals for the Federal Reserve to determine its monetary policy stance.

While labour market is registering positive changes for the past couple of years, with more than three million new jobs created, consumer prices in the US remain subdued. Negative impetus was also provided by oil prices in the second part of 2014. Fed’s officials have stated last Wednesday that they are going to monitor situation with both labour market and inflation, before giving any guidance for an increase of the benchmark interest rate. Meanwhile, some members of the FOMC, including the St. Louis Fed President James Bullard, called for a hike as soon as possible, in order to comply with economic reality, namely the current expansion phase.

GBP

“If you wanted a demonstration that low food and energy prices are good for consumer spending, then this is it.”

- Scotiabank

Volume of retail sales in the United Kingdom climbed considerably more than market expected in February amid by lower inflation and improving consumer confidence in the country, with all categories of sales showing gains. All in all, British retailers sold 0.7% more goods and services in the previous month, even though analysts expected the indicator to add only 0.4% on a monthly basis. The same growth number was registered by the retail sales indicator which excludes fuel. Annual gain, in turn, accounted for as much as 5.7%, far above than 4.7% estimated by economists. In addition, sales’ volume for January was revised upwards, from a decline of 0.3% up to an increase of 0.1%. Consumer spending in the UK is being provided with positive impetus by rising confidence in sustainable economic growth, falling gasoline prices and rising real wages. Inflation fell to as low as zero last month, while prices of shop goods dropped by 3.6% on the annual basis, measured by the deflator, the fastest downward change since 1996.

Meanwhile, Confederation of British Industry announced a better than forecasted advance in the index for realised sales. This indicator, calculated by surveying 125 retail and wholesale companies, jumped to 18 points in March, up from just one point a month ago. A reading above zero speaks for higher sales volume, which indicates that consumers are prepared to spend more even despite a threat of deflation the nearest future.