This morning’s raft of fundamental news for the Eurozone covered 8 separate items of data covering a variety of countries and topics.  The day started with French consumer spending which was one of the few pieces of news to come in worse than forecast at -2.0% against a forecast of -1.0%.  As a primary guage of consumer spending it measures the change in total value of inflation adjusted spending by consumers.  By coming in lower consumer confidence is still very weak.  This was followed by two further items of French data, namely Flash Manufacturing PMI and Flash Services PMI, both of which came in better than expected.   Both are diffusion indices and are based on a survey of purchasing managers and both are considered leading indicators where any reading above 50 indicates an economy in expanding and below 50 in contraction.  By coming in at 36.3 and 42.9 respectively against forecasts of 35 and 40.2 it could indicate the economy has at least stabalized.  The equivalent German numbers were released at the same time and here to these came in slightly better than forecast with 32.4 for Maufacturing PMI against 32.1 and 41.7 for Services PMI against 41.2.  A similar trend in the German economy.   Whilst we might have expected the euro to strengthen on these results one does have to remember that these figures cannot be taken in isolation as some of the newer members as well as the PIGS (Portugal, Ireland, Greece and Spain) are in a fairly dire state and it would not take much to see one of two of these tip the balance dramatically.  Indeed this aspect was highlighted by the next data set with the current account figures coming in far worse than expected at -12.7 billion against a forecast of -6.7 billion.   These numbers represent the difference between imports and exports and if the actual is better than forecast it is generally seen as positive for the euro because the figures are directly linked to currency demand – a rising surplus indicates that foreigners are buying more of the currency.  The final set of figures were for the whole of Europe for both manufacturing and services PMI and again these came in slightly better than expected at 34.0 and 40.1.

Later in the day the focus shifts to the US where the Chairman of the Federal Reserve, Ben Bernanke is due to testify along with Tim Geithner, to the Financial Services Committee where they will be speaking about the problems at AIG.  The session is generally in 2 parts – the first of which is a pre-prepared statement followed by a question and answer session, and as always, it will be in the unprompted answers that we are likely to see significant volatility in the market and in the euro to dollar pair.   The problems with AIG are well documented not least the issues surrounding bonus payments awarded after the company was bailed out by taxpayer money.

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