European Central Bank’s Current Account Surplus Falls in May

European Central Bank’s Current Account Surplus Falls in May
July 21, 2020

 

The Eurodollar rose against the yen in the Asian session yesterday after the Japanese trade deficit data missed economists’ estimates. However, the report of lower-than-anticipated PPI data from Germany and a sharp decline in the Eurozone’s current account surplus in May enabled the yen to regain the lost ground during the European session. In the past 24 hours, the EUR/JPY pair traded in a range of 122.20 and 122.97.

According to the Japanese Ministry of Finance, the trade deficit narrowed to ¥0.42 trillion in June, from ¥0.59 trillion in the earlier month, but missed economists’ forecasts for a trade deficit of ¥0.33 trillion. The country’s exports declined over 20% for the third consecutive month even as major markets began to ease lockdown restrictions. In terms of value, overall exports dropped 26.2% y-o-y. Economists had anticipated a 24.7% decrease.

June trade data indicates that the worldwide economic decline could continue as unabated the coronavirus infection in the U.S. and other countries would limit initiatives to reopen the market.

Last month, the International Monetary Fund trimmed the economic outlook for Japan and other countries, forecasting a profound recession and slower recovery anticipated two months earlier.

Haruhiko Kuroda, Bank of Japan’s Governor, stated that he anticipates the country’s economy to recover little-by-little in the second half of 2020, but the risks are tilted on the lower side.

Commenting on data, Bloomberg’s analyst said, “Looking ahead, exports are likely to continue to recover in 3Q — depending on the shape of the recoveries in demand in the U.S. and Europe. Imports should also recover at around the same pace, reflecting reduced restrictions on domestic activity.”

Japan’s exports to the U.S. plunged 46.6% y-o-y. Likewise, shipments to the E.U. decreased 28.4%. Imports fell 14.4%. Analysts anticipated a 17.6% decline.

In Europe, German statistical agency Destatis stated that the producer price index (PPI) remained unchanged in June, compared with a 0.4% decline in the earlier month. The market had anticipated the PPI to increase by 0.2%.

On a y-o-y basis, the PPI for industrial products fell by 1.8% in June. Likewise, in the earlier month, the PPI fell by 2.2%.

Overall, energy prices fell by 6.2%. On a yearly basis, the price of petro products decreased 20.5%, while the price of natural gas fell by 13.8%. Nevertheless, the price of petroleum products rose by 5.5% m-o-m in June.

The price of intermediate goods declined 2.5% y-o-y in June. Similarly, the price of basic iron, steel, and ferro-alloys decreased 9.9%. However, the price of precious metals increased 21.7% y-o-y in June. Interestingly, the price of ready-mix-concrete increased 4.9%. Also, the price of sugar rose by 17.6%, while the price of meat and poultry meat products increased by 5.7%. Butter prices decreased 16.4% y-o-y in June.  Notably, the price of consumer and capital goods increased by 1.5% and 1.2%, respectively.

Data provided by the European Central Bank (ECB) reveals that the current account surplus decreased to €8 billion in May, compared with a current account surplus of €14.30 billion in the earlier month. Economists had anticipated an increase in the current account surplus to €15.20 billion.

The current account surplus declined to €264 billion y-o-y in May 2020, from €318 billion y-o-y in May 2019. The decline was led a drop in surplus related to services (€31 billion Vs. €99 billion) and primary income (down to €69 billion from €89 billion).

On a y-o-y basis, the Eurozone residents invested €468 billion in overseas securities in May 2020. During the same period, non-residents invested €355 billion in Eurozone securities. Net investments made by Eurozone residents in overseas assets were €49 billion in May 2020. Likewise, the net investment made by non-residents in the Eurozone assets was €126 billion in the same period.

The weak data from both the E.U. and Japan is expected to keep the EUR/JPY pair range-bound with a bearish bias in the short-term.

The price chart indicates that the EUR/JPY pair was unable to break the resistance level of 122.50 in a firm manner. The next support is anticipated only near 120.30. Additionally, the stochastic oscillator is also making new lows. Therefore, we are anticipating the currency pair to move down in the short-term.

JPY - technical analysis - 21st July 2020

Sammy

Sammy

Sammy is our forex expert, with over 20 years experience in the financial sector, she will be keeping you up to date with the ups and downs of currencies around the world


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