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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: John Pitera who wrote (18689)	2/1/2017 5:30:41 AM
From: John Pitera	Read Replies (1) \| Respond to of 33421

European economic and currency update: he Eurozone1. Once again, let’s begin with the euro area where we see more evidence of rising inflation. The charts below show the French and the Spanish harmonized year-over-year CPI. We also have the Italian manufacturing PPI moving higher. At the Eurozone level, consumer inflation also rose, beating economists’ forecasts. While given the figures above the ECB should certainly be curtailing its QE program, some caution is warranted. Here is why. As the chart below shows, *energy was by far the biggest driver behind the rise in the euro area inflation.* Source: @EU_Eurostat, @josephncohen; Further reading And if we look at the year-over-year increases in crude prices, it’s clear that we are past the peak return and the doubling of oil prices will not be repeated. Unless other sectors begin to contribute more to the CPI, Eurozone inflation is likely to moderate. Nonetheless, the deflationary risks that were behind the ECB’s massive bond-buying program are no longer there. 2. Trump’s trade adviser *Peter Navarro accused Germany of taking advantage of “grossly undervalued” euro to boost* its trade surplus to record highs. Source: @FT; Read full article The euro jumped on the news. Higher than expected CPI figures (above) also provided some tailwinds for the currency. 3. Germany has indeed *benefited from years of euro weakness, allowing it to compete effectively with Japan for example. As a result, the nation’s unemployment rate just hit a record low.* 4. At the eurozone level, the unemployment rate also fell, with the latest figure coming in better than the forecasts. Among the major Eurozone economies, Italy remains an outlier as the country’s unemployment rate unexpectedly rose. Youth unemployment hit 40.1%. 5. The Eurozone GDP growth beat consensus, with the year-over-year expansion in 2016 (1.8%) exceeding that of the United States (1.6%). *Now consider the diverging monetary policy trajectories of the ECB and the Fed. Does this make sense?* 6. Political risks in the Eurozone continue to make headlines. • Greek bond yields continued to rise as the focus turns to the IMF. Will they participate in the latest bailout tranche? Source: @fastFT; Read full article • Marine le Pen’s will work to take France out of the euro within six months after being elected. Here comes “Frexit.” Source: @fastFT; Read full article Back to Index The United Kingdom1. UK’s household credit slowed sharply amid predictions of soft consumer spending this year. 2. Mortgage approvals also came in below forecasts. Back to Index EuropeElsewhere in Europe, take a look at the home price increases in Oslo. Source: Credit Suisse