European Economic Outlook Dims With Italy And Greece Facing Increased Scrutiny


(GR) Troika has found some “serious shortcomings” in Greece’s reforms – Rheinische Post

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  • Citing unnamed German govt sources that the Greek Government failed to fulfill 210 of the 300 budget savings requirements.
  • Efforts to implement privatization this year have resulted in only two measures with a volume in the low two-digit millions of euros.
  • Germany planning to reject Greece’s request for a 2-yr delay in its budget savings targets; will only have a maximum delay of a few weeks for implementation of its deficit targets.
  • Follow Up: IMF Chief Lagarde: Too premature to discuss extending Greek bailout agreements.

(IT) MOODY’S DOWNGRADES ITALY’S SOVEREIGN RATING TWO NOTCHES TO BAA2 FROM A3, MAINTAINS NEGATIVE OUTLOOK

The decision to downgrade Italy’s rating reflects the following key factors:

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  • Italy is more likely to experience a further sharp increase in its funding
  • Italy’s near-term economic outlook has deteriorated, as manifest in both weaker growth and higher unemployment, which creates risk of failure to meet fiscal consolidation targets

INSIGHT: 

  • S&P rates Italy at BBB+ (action taken on Jan 13th), Negative Outlook (one notch above Moody’s);
  • Fitch rates Italy at A- (action taken on Jan 27th), Negative (two notches above Moody’s)
  • Moody’s last rating cut was on Feb 13th by one notch from A2 to A3.

How to interpret these headlines:

By the looks of it, I believe there are more bad news on the horizon for the Euro, especially considering that Spain is also likely to be downgraded (yet again!).  European Economic Outlook certainly has deteriorated in the last few months, and with the current global economy struggling, the Euro is likely to remain under pressure until either the US Federal Reserve launches another round of quantitative easing, or significant improvements take place in the troubling member states, namely Spain, Greece, and now Italy.

I would still maintain a bearish outlook on the Euro as I believe the overall market to be on a cautious tone with the Euro.  However, I would definitely wait for a pull-back before jumping into another SELL trade as some consolidation could take place before EURUSD drops below the 1.2000 level.

FUNDAMENTALS
Forex Weekly Outlook May 22 ~ 26, 2017
Forex Weekly Outlook – May 15 ~ 19, 2017
IMF cuts global growth projections amid China slowdown, rock-bottom oil prices
World economy risks another crash unless they continue to support growth with low interest rates: IMF
Central banks cannot keep pumping cheap credit into series of asset bubbles
About Henry Liu

My name is Henry Liu and I am a Forex Trader and Mentor. I help traders achieve consistent income trading Forex while spending less time trading. My focus in trading is a combination of Fundamental Analysis, Technical Analysis, and Market Sentiment. Far too many retail Forex traders concentrate on just one aspect of trading, technical analysis, and ignore everything else; it is my goal (and vision) to educate every trader on how to take advantage of news trading and become more balanced traders.

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Comments

  1. peter nguyen says:

    Would you say a pullback to 1.2400 on the Eur/Usd a good point to short?

    thanks

  2. Those news are already priced in. There is a significant pull back during the New York session on friday, EUR USD pair surged up past the support-turned-resistance level of 1.22.

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