(MENAFN– ecpulse) Europe was on market watch once again last week amid rising uncertainty about the next direction in the FX market, as macroeconomic data from the euro-zone were somehow upbeat, although debt clouds continue to cast its shadows upon the 17-nation currency bloc.
Economic confidence in the euro zone improved unexpectedly in June, adding to signs the 17-nation economy is starting to recover from a record-long recession, while a separate report showed labor market conditions in Germany advanced this month.
Data suggested that euro-zone economy is starting to stabilize after shrinking for six quarters in a row. The euro-zone economy contracted 0.2 percent in the first quarter, with recession forecasted to end this quarter as the economy stagnates before returning to growth in the following three months.
Adding to optimism, a political deal on the European Union’s seven-year budget has been struck last week. In fact, EU leaders will consider a seven-year budget of 960 billion euros, plus 6 billion euros to help youth training schemes.
The deal came one day after leaders agreed on agricultural reform and how to rescue troubled banks. EU finance ministers agreed on a deal about future bank bailouts and who is liable to pay for them.
However, the euro-zone economy remains fragile and there is no evidence that the improved sentiment will help the whole bloc stave off a deeper recession in the near term.
United Kingdom
The United Kingdom dominated the sentiment last week as well, after Britain Gross Domestic Product (GDP) data confirmed the economy grew 0.3 percent in the first quarter of 2013, avoiding the feared triple-dip recession.
However, annualized GDP was downwardly revised by three percentage points to a rate of 0.3 percent, trailing analysts forecast of GDP to remain unchanged at 0.6 percent.
Encouraging signs of recovery continue to emerge, but the economy is not out of the woods yet. After all, most of the upbeat news was linked to current activity, rather than improvements in the fundamentals driving growth.
UK Chancellor George Osborne unveiled spending cuts last Wednesday, in a bid to reduce the country`s big public deficit, but promised to reinvest some of the money saved to counter criticism of excessive austerity. Osborne spelled out 11.5 billion pounds in cuts for the 2015-16 fiscal years.
Gold
The focus of the broad market has been on the hectic movements in commodities markets, and especially the gold, which has been suffering heavy losses since the 2013 kicked off.
Gold fell below $1,200 an ounce last week – the lowest since August 2010. Gold prices remain on track for its biggest quarterly slump in more than 30 years as investors flee on persistent worries over the U.S. Federal Reserve`s plan to wind down its monetary stimulus.
Markets continue to scrutinize any comments by the Fed’s since many officials have overestimated the pace of growth in recent years. In fact, no one wants the Fed to start to scale back stimulus prematurely, thus future movements will majorly steered by the prospects of Fed’s bond-purchase program.
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