Euro Watch

As expected, the European Central Bank raised interest rates in the Eurozone on Thursday. The rate rise was by 25 basis points ti 2.75 percent. Some analysts had speculated earlier in the week that it would hike rates by 50 basis points, but sentiment had turned to an expectation of the smaller rise in rates as the Bank’s meeting drew nearer.

Data contributing to the decision to raise rates included consumer price inflation that was up 2.5 percent in May, above the ECB’s target of below 2 percent. Consumer price inflation had been up by 2.4 percent in May and by 2.2 percent in March. In addition, producer price inflation was up to 5.4 percent in April, with core inflation up by 2.2 percent.

The circumstances that kept the Bank from issuing a 50 bp increase included fears that the recovery in the Eurozone’s economy could be too dependent on growth in export-focused sectors and that domestic growth could stall if money is tightened too much or too quickly. In addition, a 50 bp hike could have strengthened the euro, which would have sent the dollar-cost of exports up. Also, the International Monetary Fund said that the region’s economy could not support too high a rate hike.

Tags: ECB: European Central Bank News, Interest Rates News by Brian Turner
No Comments »

New economic data from the Eurozone has made it more likely than ever that the European Central Bank will raise interest rates when it meets June 8. The new data comes from several sources and shows that inflation is up, unemployment is down, and retail sales are up. The only real negative data is that consumer spending in Germany is still held back by real wages that are not growing or are actually down.

Inflation in the Eurozone was up to 2.5 percent in the most recent figures available after being at 2.4 percent in the previous reading. This figure, taking in the entire region, was released by Eurostat, the EU’s statistical office, and is at its highest since October 2005. Core inflation, excluding the prices for food and oil, also shows signs of rising. The 1.6 percent rate in April is, however, still considered within reasonable limits and some economists have put indications that it is on the rise to one-time factors.

Elsewhere, both Germany and France have said that unemployment in their nations is down. In France, the unemployment rate is reported to be 9.0 percent, its lowest level in three and a half years. In Germany, unemployment was down to 11 percent in May. That left 4.596 million people out of work in German, but was the smallest percentage of the working population out of a job since December 2004.

In Germany, retail sales were up by 2.8 percent in April after having dropped by 1.7 percent in March, according to that nation’s federal statistics office. Even so, the combined figures for both months show sales still down by 0.8 percent as spending by consumers is limited by a lack of growth in real wages.

Still, the total economic picture in the Eurozone has most analysts expecting that the ECB will raise interest rates by at least a quarter of a percentage point when it meets next.

Tags: ECB: European Central Bank News, European Economy News, Interest Rates News by Brian Turner
No Comments »

New economic data from the Eurozone has made it more likely than ever that the European Central Bank will raise interest rates when it meets June 8. The new data comes from several sources and shows that inflation is up, unemployment is down, and retail sales are up. The only real negative data is that consumer spending in Germany is still held back by real wages that are not growing or are actually down.

Inflation in the Eurozone was up to 2.5 percent in the most recent figures available after being at 2.4 percent in the previous reading. This figure, taking in the entire region, was released by Eurostat, the EU’s statistical office, and is at its highest since October 2005. Core inflation, excluding the prices for food and oil, also shows signs of rising. The 1.6 percent rate in April is, however, still considered within reasonable limits and some economists have put indications that it is on the rise to one-time factors.

Elsewhere, both Germany and France have said that unemployment in their nations is down. In France, the unemployment rate is reported to be 9.0 percent, its lowest level in three and a half years. In Germany, unemployment was down to 11 percent in May. That left 4.596 million people out of work in German, but was the smallest percentage of the working population out of a job since December 2004.

In Germany, retail sales were up by 2.8 percent in April after having dropped by 1.7 percent in March, according to that nation’s federal statistics office. Even so, the combined figures for both months show sales still down by 0.8 percent as spending by consumers is limited by a lack of growth in real wages.

Still, the total economic picture in the Eurozone has most analysts expecting that the ECB will raise interest rates by at least a quarter of a percentage point when it meets next.

Tags: ECB: European Central Bank News, European Economy News, Interest Rates News by Brian Turner
No Comments »

Comments from the president of the European Central Bank on Thursday after the Bank’s decision to maintain interest rates at 2.5 percent for the time being were interpreted to mean that the Bank will hike interest rates at its June meeting. These comments showed little concern for the current strength of the euro and led to further gains in the shared currency.

The European currency added 0.4 percent to $1.2675 versus the US dollar and was up 0.2 percent to ¥143.90 in relation to the Japanese yen. The euro was at £0.6861 against sterling after having dropped to £0.6836 earlier in the session on the release of strong economic data out of the UK.

The shared currency was a bit weaker, however, versus the Swiss franc at SFr1.5602. The Swissie was also up 0.4 percent to SFr1.2313 in relation to the US dollar and added 0.3 percent to ¥92.21 against the yen.

Tags: ECB: European Central Bank News, Exchange Rates News by Brian Turner
No Comments »

Comments from the president of the European Central Bank on Thursday after the Bank’s decision to maintain interest rates at 2.5 percent for the time being were interpreted to mean that the Bank will hike interest rates at its June meeting. These comments showed little concern for the current strength of the euro and led to further gains in the shared currency.

The European currency added 0.4 percent to $1.2675 versus the US dollar and was up 0.2 percent to ¥143.90 in relation to the Japanese yen. The euro was at £0.6861 against sterling after having dropped to £0.6836 earlier in the session on the release of strong economic data out of the UK.

The shared currency was a bit weaker, however, versus the Swiss franc at SFr1.5602. The Swissie was also up 0.4 percent to SFr1.2313 in relation to the US dollar and added 0.3 percent to ¥92.21 against the yen.

Tags: ECB: European Central Bank News, Exchange Rates News by Brian Turner
No Comments »

New data on inflation and business confidence out of Germany sent government bond yields in the Eurozone higher on Tuesday. Energy prices on the rise and strong business activity sent inflation in Germany up by 0.5 percent in April, which was considered to be an indication that inflation in the rest of the region might also be up. Higher inflation is expected to spur the European Central Bank to raise interest rates to 2.5 percent soon. Additionally, the IFO business confidence index in Germany was up to 105.9, from 105.4 last month. The index had been expected to decline to 104.8.

In late afternoon trade, the ten-year Bund had added 6.3 basis points to a yield of 3.989 percent, while the two-year Schatz was yielding 3.371 percent, a gain of 6.2 basis points.

Tags: ECB: European Central Bank News by Brian Turner
No Comments »

In the Eurozone on Thursday, yields on government bonds were down and prices rose after the president of the European Central Bank made comments to the effect that the Bank has no intention of raising interest rates in May, contrary to the expectations of many analysts. The remarks came after the Bank voted to leave interest rates at their current level of 2.5 percent.

Yields had risen almost 5 basis points to 2.887 percent on ten-year bonds before the rate decision was announced. After the decision and remarks, the yield on the ten-year Bund dropped significantly, although by afternoon it was still up 1.7 basis points to 3.855 percent. Yields on the two-year Schatz were down by 2.3 basis points to 3.274 percent.

Tags: ECB: European Central Bank News, European Economy News by Brian Turner
No Comments »

The European Central Bank chose to keep interest rates at their current levels in a meeting on Thursday. The decision was expected, but many analysts believe that the ECB will raise rates next month, despite comments to the contrary from the president of the ECB.

In the Eurozone, interest rates remained at 2.5 percent, but some analysts expect that by the end of the year it will have risen to 3.5 percent. This expectation is based on data showing that the region’s economy is recovering and business confidence is growing. The Purchasing Managers Index was at 58.2 in March, the highest it has been since September 2000, companies have increased capital spending, and various measures indicate that economic growth in the first three months of this year is at 0.7 percent. Less optimistic data includes the fact that unemployment remains high – 9.1 percent in Germany and 8.9 percent in France – and the decline of retail sales by 0.2 percent in February.

Tags: ECB: European Central Bank News, Interest Rates News by Brian Turner
No Comments »

The euro rose in relation to most major currencies during the week ending March 3. It was up 1.3 percent to $1.2031 versus the US dollar, gained 1 percent to ¥140.12 against the Japanese yen, and rose 0.8 percent in relation to sterling, to £0.6859.

The euro’s success came as the European Central Bank once again raised interest rates by a quarter point, to 2.5 percent, after having hiked rates by the same amount in December. Comments from ECB board members made it clear that interest rates will go up again in the foreseeable future. Besides raising rates, the ECB also revised its forecasts for growth and inflation for the year, predicting that both will be higher than previously expected.

Accordingly, Goldman Sachs raised its forecast for eurozone interest rates at the end of the year from 2.5 percent to 3 percent. Meanwhile, analysts at Citigroup attributed at least part of the euro’s advances to the narrowing yield spread between two-year government bonds in the eurozone and the United States.

Tags: ECB: European Central Bank News, Exchange Rates News, Interest Rates News by Brian Turner
No Comments »

The euro rose in relation to most major currencies during the week ending March 3. It was up 1.3 percent to $1.2031 versus the US dollar, gained 1 percent to ¥140.12 against the Japanese yen, and rose 0.8 percent in relation to sterling, to £0.6859.

The euro’s success came as the European Central Bank once again raised interest rates by a quarter point, to 2.5 percent, after having hiked rates by the same amount in December. Comments from ECB board members made it clear that interest rates will go up again in the foreseeable future. Besides raising rates, the ECB also revised its forecasts for growth and inflation for the year, predicting that both will be higher than previously expected.

Accordingly, Goldman Sachs raised its forecast for eurozone interest rates at the end of the year from 2.5 percent to 3 percent. Meanwhile, analysts at Citigroup attributed at least part of the euro’s advances to the narrowing yield spread between two-year government bonds in the eurozone and the United States.

Tags: ECB: European Central Bank News, Exchange Rates News, Interest Rates News by Brian Turner
No Comments »

In the eurozone on Thursday, the euro gained value after the European Central Bank voted to raise its main refinancing rate by a quarter point to 2.5 percent. At the same time, the ECB president made comments that indicated that there will be more rate hikes to come this year. He said that the current rate hike will only “contribute” to keeping inflation in check.

The ECB has predicted that inflation this year will be around 1.9 to 2.5 percent, replacing its December forecast of inflation in the 1.6 to 2.6 percent range. The Bank also predicted that the eurozone economy will grow by 1.7 to 2.5 percent this year, somewhat more than its earlier estimate of 1.4 to 2.4 percent growth for 2006.

The euro gained 0.9 percent on the US dollar to $1.2016, while it added 0.8 percent in relation to sterling, to £0.6862. The shared currency was also up in relation to several Scandinavian and Eastern European currencies, and it gained 1 percent to ¥139.60 versus the Japanese yen.

Tags: ECB: European Central Bank News, Exchange Rates News, Interest Rates News by Brian Turner
No Comments »

In a move that was expected by most analysts, the European Central Bank raised its main refinancing rate on Thursday by a quarter point, to 2.5 percent. It was only the second time rates have been raised in the eurozone in five years. Interest rates are expected to rise by a further quarter or half point to 2.75 percent or 3 percent by the end of the year.

Today’s hike and those predicted to come are driven by improving economic data from the eurozone and an expected pressure toward inflation. The headline inflation rate was 2.4 percent in the year ending in January, above the ECB’s target of around 2 percent. The core interest rate, which excludes food and energy prices, was at 1.2 percent.

Another pressure to raise interest rates comes from the concern by some members of the ECB’s governing council that if interest rates continue to remain low, borrowing by households and businesses will continue to grow. New data shows that lending to individuals was up at an annual rate of 9.4 percent in the eurozone in January, the fastest growth since 2000. Business lending was also up. Property prices are also up, by 7.7 in the first half of last year, leading the ECB’s president to argue that a tight monetary policy might be necessary to control eurozone property prices.

Tags: ECB: European Central Bank News, European Economy News, Interest Rates News by Brian Turner
No Comments »

In a move that was expected by most analysts, the European Central Bank raised its main refinancing rate on Thursday by a quarter point, to 2.5 percent. It was only the second time rates have been raised in the eurozone in five years. Interest rates are expected to rise by a further quarter or half point to 2.75 percent or 3 percent by the end of the year.

Today’s hike and those predicted to come are driven by improving economic data from the eurozone and an expected pressure toward inflation. The headline inflation rate was 2.4 percent in the year ending in January, above the ECB’s target of around 2 percent. The core interest rate, which excludes food and energy prices, was at 1.2 percent.

Another pressure to raise interest rates comes from the concern by some members of the ECB’s governing council that if interest rates continue to remain low, borrowing by households and businesses will continue to grow. New data shows that lending to individuals was up at an annual rate of 9.4 percent in the eurozone in January, the fastest growth since 2000. Business lending was also up. Property prices are also up, by 7.7 in the first half of last year, leading the ECB’s president to argue that a tight monetary policy might be necessary to control eurozone property prices.

Tags: ECB: European Central Bank News, European Economy News, Interest Rates News by Brian Turner
No Comments »

The euro was a bit stronger on Tuesday, increasing by 0.1 percent to $1.1902 in relation to the US dollar. The shared currency was trading at ¥139.77 against the Japanese yen.

The shared currency was helped by the ZEW index, which showed the German economy upbeat despite a bit of a decline in the expectations index, which fell to 69.8 in February, slightly below the expected level of 71.0 but still close to a high due to gains since November.

Tags: ECB: European Central Bank News, European Economy News, Exchange Rates News by Brian Turner
No Comments »

Document Security Systems, a small US technology firm, is suing the European Central Bank for an alleged unlicensed use of its anti-counterfeiting technology in printing euro notes.

The company claims that the ECB included patented technology among the security features used in euro banknotes. The suit was filed with the European Court of First Instance, based in Luxembourg, and is thought to be both the first case of its kind against the ECB and the first patent law case filed in the court, which handles cases against European Union institutions.

The lawyer representing DSS, Larry Cohen, said that the company is seeking to collect fees that would have been paid had the ECB entered into a reasonable royalty agreement with DSS for the use of its technology. Mr. Cohen said that the damages could run into the millions of dollars.

The An ECB spokesman said that the bank was aware of the lawsuit but had no comment on the issue. The case is not expected to be heard until late next year at the earliest. Meanwhile, DSS is contemplating legal action against other central banks it believes is using its technology illegally. Shares in DSS rose to a one-year high of $9.55 after the lawsuit was announced on August 1, and were trading at around $9 at early afternoon on Wednesday.

Tags: ECB: European Central Bank News, European Union News by Brian Turner
No Comments »

The euro fell to its lowest point in relation to the US dollar in fourteen months as it reached $1.1869 against the greenback.

The European parliament has added to pressure on the European Central Bank to cut interest rates there by turning down a report that praised the ECB’s monetary policy by saying that central bank is too focused on stability while not taking into consideration the importance of economic growth.

The ECB has not raised interest rates in two years.

Tags: ECB: European Central Bank News, European Economy News, European Stocks & Shares News, European Union News by Brian Turner
No Comments »

The euro reacted badly to the news of a larger than expected interest cut from Sweden, and to the increased talk the rate cut triggered that the European Central Bank might follow suit and cut eurozone interest rates soon.

Bad consumer purchasing data from France added to the speculation.

Despite the insistence of ECB officials that there is no consideration being made to change interest rates in either direction and that the current rate of 2 percent is “appropriate”, the euro fell in relation to the US dollar, sterling and the yen.

The shared currency fell 0.1 percent to $1.2137 in relation to the dollar, lost 0.2 percent to sterling, to £0.6640, and declined 0.9 percent to ¥131.70 against the yen.

Tags: ECB: European Central Bank News, European Economy News, European Stocks & Shares News, Interest Rates News by Brian Turner
No Comments »

The European Central Bank announced on Thursday to maintain its main interest rate at 2 percent for the 24th month in a row. The decision was expected, especially considering the recent votes rejecting the European Union constitution by the French and the Dutch.

The decision did not please those who have been calling for the ECB to cut interest rates to stimulate economic growth. Those who have been calling for rate cuts include the Organization for Economic Co-operation and Development (OECD), the Ifo Institute in Germany, Germany’s economics and labour minister, and several Italian ministers.

Reports that business confidence in Germany is down and that growth expectations for the eurozone in 2005 and 2006 have been revised downward have helped stimulate the recommendations that rates be cut. The OECD has recommended that the rate should fall by 50 basis points.

Such a cut is unlikely, however, considering that Jean-Claude Trichet, president of the ECB, believes that interest rate cuts would in fact hurt prospects for growth and has said that he would like to see eurozone interest rates rise as soon as conditions permit it.

Tags: ECB: European Central Bank News, Interest Rates News by Brian Turner
No Comments »

The European Central bank decided on Wednesday to keep its main interest rate at 2 percent for the twenty-third straight month in a row.

Analysts suspect that the weak economy will mean that interest rates will probably remain the same until at least autumn.

In the eurozone growth is weak and unemployment is rising, while consumer confidence is low. At the same time, inflation rates remain under control.

The European Commission has already revised earlier 2005 growth estimates in the eurozone. The current estimate for 1.6 percent growth is down from 2 percent.

The Commission put the blame for the revision on high oil prices and the strength of the euro. Additionally, German’s six top economic institutes changed their growth estimates for 2005, revising them down to 0.7 percent from an earlier estimate of 1.5 percent.

Although some members of the ECB’s governing council are believed to be in favor of raising interest rates, the current unfavorable economic conditions make such an action unwise at the present time.

Tags: ECB: European Central Bank News, European Economy News, Interest Rates News by Brian Turner
No Comments »

Jean-Claude Trichet, president of the European Central Bank, has warned that governments must adapt to stay within existing rules on budget defecits.

Currently, any budget deficit should remain under 3% if Gross Domestic Product, but both France and Germany have failed to stay on target for this.

Germany has been outside of 3% for the past 3 years, and still wants to keep costs of unifying the country out of current calculations. France is specifically looking to discount research and development costs to help balance its own figures.

At a committee of the European Parliament Jean-Claude Trichet stated:

“The credibility of the excessive deficit procedure as a means to deter and correct excessive deficits needs to be fully preserved…this is necessary to anchor expectations of fiscal soundness which is fundamental, not only for macro-economic stability and cohesion in the euro area, but also for enhancing confidence and fostering growth prospects.”

Currently the European Central Bank is predicting moderate growth for 2005/2006, with around 2% inflation across the eurozone.

Tags: ECB: European Central Bank News by Brian Turner
No Comments »