Recent negative statistics from Europe made Brussels’ officials revise their forecasts for the next year. If in the beginning Euro comission has expected growth of the European economy by 1.4%, now this assessment is corrected to 1.1%. By results of the current year a weak growth by 0.4% is anticipated, though a lot will depend on two last months. If macroeconomic indices continue to decline, then it can’t be ruled out, that as a result growth will constitute even a smaller figure.
Programs of expenditures’ cuts have become one of the main threats to economy growth again. A lot of states in Europe still do not fit the plan of downgrading of budget deficit to 3% of GDP. Perhaps in light of that the European commission they will insist on incremental sequestration. Things are not are not going quite well in Spain, where the deficit has grown again and by 2015 might reach 6.6%. The reason for what is a quite high unemployment, which lead to the fall of tax inflow in the state’s budget. Yesterday’s Spanish Unemployment Change was quite disappointing ending up at 87.0K, by far exceeding the forecast.
It is clear that because of the weak economic growth the debt load is growing. Next year the figure in Italy will set a new record on the level of 134% of the GDP. Italy has got the biggest debt in all of Europe: over 2 trillion Dollars. It is quite logical, that all that reflects on overall European statistics: in 2014 consolidated debt of 18 states of the monetary union will set a new maximum of 95.9% of the GDP.
In such conditions authorities refer to the tested tool of filling governmental finance by increasing taxes. In Italy a new law might be passed soon, which significantly increases the tax burden of international internet companies. First of all, ads’ market is at focus. Currently it works through European jurisdiction with low taxation like in Luxemburg. As a result Google for instance almost doesn’t pay any taxes in Italy.
In spite of the fall of the Euro last week, there are still a lot of talks about measures to undertake in order to downgrade the rate further. At the eve of the next meeting Italian finance ministry called the ECB for softening the policy even more in order not to undermine recently started economic recovery. Last week French ministers came up with similar claims, but they are not likely to have any influence of Draghi.
The Euro has an important support at 1.3450. Crucial resistance is at 1.3520 area. Yesterday in the end of the day the pair was trading in the narrow range. Now see that after a sharp rise it is undergoing corrections. Most likely we are going to see resumption of the bullish trend soon.
The pair has found support at around 98.40. It sustains recent rally from 96.94. Current broad range is 96.90-99.00. If the pair manages to break above the upper boundary, it can reach 100.
The Pound continues trading strong. If it is above 1.6050 it can appreciate to 1.6200. We see that after recent correction the Pound is getting back on track of bullish trend.
00:30 AUD Trade Balance -0.28B
08:00 GBP Halifax House Price Index (MoM)
08:00 GBP Halifax House Price Index (YoY)
08:13 EUR Spanish Services PMI
08:43 EUR Italian Services PMI
08:48 EUR French Services PMI
08:53 EUR German Services PMI
08:58 EUR Services PMI
09:30 GBP Industrial Production (MoM)
09:30 GBP Manufacturing Production (MoM)
10:00 EUR Retail Sales (MoM)
10:00 EUR Retail Sales (YoY)
11:00 EUR German Factory Orders (MoM)
13:30 CAD Building Permits (MoM)
15:00 CAD Ivey PMI 51.0 51.9
15:00 GBP NIESR GDP Estimate