Euro Crisis Damage Seen in Worst Quarter Since Lehman
Euro-area economic data due this week will probably show the damage inflicted by the region’s sovereign debt crisis with the worst quarterly decline in output for almost four years.Gross domestic product shrank 0.4 per cent in the fourth quarter. That would be the biggest decline since the first quarter of 2009, when GDP fell 2.8 per cent in the wake of the collapse of Lehman Brothers Holdings Inc. The data is due to be published on Feb. 14.
While measures to stem the region’s debt turmoil have helped curb sovereign bond yields from Spain to Greece, at least seven countries of the 17-nation bloc are in recession, leaving 18.7 million people out of work. The European Central Bank President Mario Draghi said last week that “economic weakness” will prevail in early 2013 even as the economy shows confidence stabilizing “at low levels.”
In other news, China surpassed the U.S. to become the world’s biggest trading nation last year as measured by the sum of exports and imports of goods, official figures from both countries show.U.S. exports and imports of goods last year totaled $3.82 trillion, the U.S. Commerce Department said last week. China’s customs administration reported last month that the country’s trade in goods in 2012 amounted to $3.87 trillion.
On the FX markets, much of the attention this week will be on the Quarterly Inflation Report from the BoE where it is widely expected that growth projections will be trimmed yet again, underscoring the need for more stimulative measures. The Q&A will likely centre around the potential change to the mandate of the central bank once Mark Carney takes over in July and whether or not more QE is needed to kick start economic growth. In terms of technical levels, supports are seen at 1.5631, 1.5578 and then at the August 10th low ahead of 1.5491. On the other hand, resistance levels are seen at the 21DMA line at 1.5841, the 200DMA line at 1.5882 and then at 1.5900.
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