The main pillars that support economic outlook were released in Europe this week, which all hinted that the economic cycle is slowing as data is showing though the debt crisis continues to dim the outlook for the region.
The European continent has seen a long week full of negative data releases that pushed markets generally lower as Draghi kept a downside pressure on the common currency alongside weak data from the Eurozone not to mention negative growth outlook by the European commission.
- Draghi keeps downside pressure on euro
- Eurozone data blow to recovery hopes
- Fed’s debate on scaling back massive quantitative-easing hurt euro, lift dollar
- Euro hits 6-week low against dollar, trades below 1.32 levels
- European Commission trims growth forecast for the Eurozone
The European Central Bank President asserted downside pressure on the euro last week after he hinted that the ECB may take action if the euro continue to strengthen, a call that saw the currency slide from its multi-month rally.
Followed by Fed’s debate to scale back its massive quantitative-easing program which also hit the common currency, where Latest FOMC meeting showed that some policymakers had been mulling a lessening or complete withdrawal of Fed stimulus.
Euro also plunged after the ECB announced on Friday that that lender will repay 61.1 billion euros of its second three-year Long Term Refinancing Operation (LTRO) securities at the first chance for an early repayment. The figure notched sharply below and nearly half analysts median estimate of 122.5 billion euros.
Data released in the week couldn’t bring except new fears and jitter into the market, as both manufacturing and services sector remained in contraction in the euro area’s largest economies while GDP figures confirmed contraction in the block’s largest economy signaling for the continuation of the current tragedy of contraction in the first quarter of 2013.
Eurozone’s largest economies, Germany and France reported an accelerated decline in services sectors, where the French sector contracted the most in four years.
On the other hand, Sentiment in the euro zone showed some improvement last week where ZEW German investor confidence rolled higher for a third month in February. Confidence among businesses in Germany continues to improve; IFO Institute reported further strengthening in confidence for the fourth month.
Moreover, European Commission trimmed its growth forecast for most Euro zone economies, as domestic demand will continue to cause substantial growth differentials across Member States.
Growth was revised downward to -0.3 percent in the Eurozone for 2013, as the weakness of domestic demand lingers and is expected to fade away slowly, with external demand the main driver of the gradual acceleration of EU economic activity in 2013.
- Pound hit hard by BoE outlook
- U.K’s credit rating under pressure
The pound fell sharply to trade below 1.52 levels last week as the markets reacted in shock to BOE’s minutes; three members voted to increase the stimulus program by 25 billion pounds to 400 billion pounds including BOE’s Governor Sir Mervyn King, Paul Fisher and David Miles.
The British pound also weakened to fresh multi-month lows amid speculations and rumors that Standard & Poor’s rating agency could downgrade UKs "AAA rating later this year.
Latest data showed that Europe continues to suffer from the escalating debt crisis, where European leaders, despite the huge effort in the past year, failed to control the debt crisis and prevent the contagion from spreading into larger economies.
All eyes will be focused on 2013, tracking the implementation of the measures taken in 2012 to heal the debt crisis, especially after the crisis forced growth to slow significantly and the pace of recovery to falter.