False optimism. Fundamental analysis for 20.05.2014
20.05.2014
A couple of years ago different parts of the euro zone showed desperate positivity. Politicians were stating that they could personally see the light at the end of the tunnel and that soon the region's economy will return to growth, becoming almost a driver for a global recovery. As time passes, it becomes apparent that not all is that simple and Europe has yet to find a basis for a return to sustainable growth.
Of course, it is very difficult not to notice the successful return of Ireland and Portugal to the debt market, as well as the cautious approach by the Greek authorities to establish regular bond issue. Let us put aside that Athens at the moment can only successfully place short-term securities. Payments on IMF and the euro zone loans are scheduled for the beginning of 2023, and that's when solvency problems may occur again.
Relatively low yield on debt bonds of the southern European countries can play a cruel joke with long-term focused politicians. Actually, the latest statistics show quite clearly that if leaving the German economy out of the equation, the rest of the euro zone would immediately be in bold red. The preliminary results of the first quarter are disappointing - Italy grew by just 0.1%, and the French GDP remained at zero.
Portugal and the Netherlands are in the red again, and Greece still has not come out of a recession (in the last 6 years, the economy has shrunk by 24%). Steady modest growth can only be seen in Spain, but it is not enough to start a full-fledged recovery. High unemployment completes the case, which affects domestic consumption, without which it will be extremely difficult to return to growth for the troubled countries.
Germany offers their "colleagues" in the euro area to take advantage of the German economic experience of enhancing competitiveness - reduced labour costs, the liberalization of the pension system, and unemployment benefits. And the success of the enterprise is far from assured, most euro zone countries have much smaller export potential than Germany during the time of the start of active reforms.
To some extent, this pattern will also have some influence on the course of the June meeting of the ECB. In recent weeks we have heard so many "announcements" about the easing of policies that it is unlikely that the regulator will leave things unchanged. Consequently, the most that can be expected from the Eurodollar is a continuation of the correction, and to dissipate these risks, I put a stop-loss on the sale transaction into the black.
RoboForex Analytical Department
Of course, it is very difficult not to notice the successful return of Ireland and Portugal to the debt market, as well as the cautious approach by the Greek authorities to establish regular bond issue. Let us put aside that Athens at the moment can only successfully place short-term securities. Payments on IMF and the euro zone loans are scheduled for the beginning of 2023, and that's when solvency problems may occur again.
Relatively low yield on debt bonds of the southern European countries can play a cruel joke with long-term focused politicians. Actually, the latest statistics show quite clearly that if leaving the German economy out of the equation, the rest of the euro zone would immediately be in bold red. The preliminary results of the first quarter are disappointing - Italy grew by just 0.1%, and the French GDP remained at zero.
Portugal and the Netherlands are in the red again, and Greece still has not come out of a recession (in the last 6 years, the economy has shrunk by 24%). Steady modest growth can only be seen in Spain, but it is not enough to start a full-fledged recovery. High unemployment completes the case, which affects domestic consumption, without which it will be extremely difficult to return to growth for the troubled countries.
Germany offers their "colleagues" in the euro area to take advantage of the German economic experience of enhancing competitiveness - reduced labour costs, the liberalization of the pension system, and unemployment benefits. And the success of the enterprise is far from assured, most euro zone countries have much smaller export potential than Germany during the time of the start of active reforms.
To some extent, this pattern will also have some influence on the course of the June meeting of the ECB. In recent weeks we have heard so many "announcements" about the easing of policies that it is unlikely that the regulator will leave things unchanged. Consequently, the most that can be expected from the Eurodollar is a continuation of the correction, and to dissipate these risks, I put a stop-loss on the sale transaction into the black.
RoboForex Analytical Department
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Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex bears no responsibility for trading results based on trading recommendations described in these analytical reviews.