INDICATORS ECONOMIC ZONE EURO
Fast facts of the economy of the eurozone
-The EMU consists of 16 member countries: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Slovenia, Spain, Sweden, Norway and the United Kingdom. Although the United Kingdom, Sweden and Norway have not entered the last facet of EMU which adopt the euro as its currency; they continue to use their own currency.
EUROZONE
|
PIB (USD million)
|
World Ranking
|
Germany
|
2.897.032
|
3
|
France
|
2.231.631
|
6
|
Italy
|
1.852.585
|
7
|
Spain
|
1.225.750
|
9
|
Netherlands
|
663.119
|
16
|
Belgium
|
393.590
|
17
|
Austria
|
321.934
|
26
|
Greece
|
307.709
|
27
|
Irland
|
222.080
|
30
|
Finland
|
210.837
|
33
|
Portugal
|
194.989
|
35
|
Luxemburgo
|
40.577
|
65
|
Eslovenia
|
37.340
|
68
|
-In accordance with the International Monetary Fund if the European Union (EU) were a country, it would be the only country with a GDP above the United States with 14.5 trillion USD.
-Apart from the currency the eurozone in common, share the same monetary policydictated by the European Central Bank (ECB). The ECB was established under strict rules for each of the members, and their main rules are:
1. price stability
2 - Low inflation (below 1.5% of the average of the three best numbers of members)
3 deficit low
4 growth
-The importance of the EUR has increased significantly as more countries in the world change their reserves of USD to EUR
The EMU important economic indicators
Here is a list of important economic indicators that tend to have a high impact on the forex market.
The interest rate announcement
The interest rate is a measure of the cost of money. The European Central Bank usesthe rate of interest as a tool to meet its most important objectives: inflation, growthand price stability.
When the ECB lower interest rates, the Euro tends to depreciate against other currencies because lower yields (e.g. investors sold their Euros to buy other currencies with higher yielding, this way increases the offer, this done to lower the price of EUR).
When the ECB raises interest rates, the Euro tends to appreciate against other currencies since it generates better returns (e.g. investors sell their local currency to buy Euros, this increases the demand for Euros and finally its price makes it).
Note: As we know it, the eurozone consists of several countries, and each of them has its own data for GDP, inflation, etc. Although it is important to have an idea of the overall performance of the EU, for the following indicators, is more important to monitor the performance of the 3 or 4 most important countries of the EU
Gross domestic product (GDP or by its acronym in English GDP) of Germany and US
The GDP of the EU is the value of the services and products produced within the territorial limits of the EU. A good GDP reflects a healthy economy.
A good number of GDP indicates that the economy is growing and the Euro tends to appreciate against other currencies.
A bad GDP number indicates the economy is shrinking and the Euro tends to lose value against other currencies.
Harmonised Consumer Price Index (harmonic consumer price index)
The HCPI is what the EU used as measure of inflation and price stability. As we haveexplained above, the ECB has certain rules for its members, and this is one of the most important, a country not be diverted 1.5% of the average of the countries betterevaluated.
Usually for the EU:
With a low number of HCPI, the Euro tends to gain value against other currencies.
With a high number of HCPI, the Euro tends to lose value against other currencies.
Unemployment data for Germany and EU
The unemployment data is always one of the best indicators of the health of an economy in any country. When the numbers are good, usually they reflect very good health.
Usually for the EU:
A good number tends to appreciate the euro against other currencies.
A bad number tends to depreciate the euro against other currencies.
Trade balance
The eurozone trade balance measures the amount of services and products purchased (imports) against those sold to other countries (exports). The trade balance of the euro zone is divided into two components: Intra-eurozone and Extra-Eurozona, Intra-eurozone concerns trade with member countries of the EU, and the Extra-Eurozona refers to the trade with the rest of the world. Usually the Extra-Eurozona has much impact on the currency market.
A number of trade balance, usually tends to appreciate the value of the Euro
A bad trade balance number, usually tends to depreciate the value of the Euro.
The majority of investors focused on the balance of trade of Germany, since this is the main economy in the eurozone.
Industrial production in Germany and the US
Eurozone industrial production measures the total production of the manufacturingindustry and the energy sector. Often this indicator is used as a proxy variable of GDP of any country.
Usually:
With quite a few Euro will win value forehead other pairs
With a bad number the Euro will lose value forehead other pairs.
Most traders and investors focus on the data of Germany as the main economy of the EU.
Note: For the following indicators, it is good to focus on the performance of Germany.
IFO Business Climate Survey (Germany)
The IFO survey is one of the most important sentiment indicators for the eurozone.This survey asks 7,000 companies in Germany: what are the conditions that in the present and future of business conditions. It is an index where 100 is the centerline between the good fats (over 100) and bad conditions (below 100).
Usually:
A good (better than expected) number tends to appreciate the value of the Euro against other currencies.
A bad (worse than expected) number tends to depreciate the value of the Euro against other pairs.
ZEW Survey (Germany)
This is a survey of experts from all over Europe about his vision of the most important indicators of Germany: inflation, growth, stock market, types of cambo for a period of 6 months. They also asked their opinion about the current macroeconomic conditions.
A bad number, means that the EUR loses value against other pairs
A good number, makes EUR gross value against other pairs.
What is the difference between the ZEW and IFO surveys?
The IFO survey is applied to business owners and companies while the ZEW is applied to experts in the field.
Bonus of 10 years of Germany
Long-term (Government) papers are always a good indicator of future prospects ofany country. In fact, if you do research, you'll see that very few developing countrieshave roles in 10 years (because very few investors would be willing to invest at the level of uncertainty).
In this case, the 10-year bond is a very good indicator of the expectations of the Euro, compared with the 10-year United States bonus:
If the rate of German bonds is higher, and the differential increases: represents a bullish sentiment of the EUR
If the rate for German bonds is higher, and the differential decreases: represents a bearish sentiment of the EUR
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