EUR/USD Fundamental Analysis August 30, 2012, Forecast

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Analysis and Recommendations:

The EUR/USD is trading at 1.2530 dipping after the release of the US Pending Home Sales data. The data showed a huge increase in home sales, well above forecast. Expectations were for 1% increase and print showed an increase of 2.4%. Also US revised GDP numbers were released showing the US economy did better in Q@ then originally reported.

This brings into question the marquee event of the week, Mr. Bernanke’s address at Jackson Hole and the mention of QE3.

The DX has moved up significantly since the release of US Pending Home Sales.

Most major FX crosses are gently selling off against the USD with the somewhat notable exception of the won.  Commodities markets are lower across the energy and metals categories, but higher across key agricultural commodities.

In Eurozone news today, the Spanish state of Catalonia is rejecting pressure to accept political conditions for aid.  It has requested €5 billion from Spain’s Regional Rescue Fund after it has been shut out of capital markets.  This is key because it has the potential to scuttle ECB President Mario Draghi’s plans to implement a bond buying program perhaps at the September 6th ECB meeting given that it is fairly clear that the ECB will require conditions via a formal request for aid by Spain from the ESM and acceptance of fiscal targets and broader guidelines.  If Spain ultimately files such a request and accepts conditions but cannot enforce them when dealing with the individual regions that are making aid requests, then the risk is that we’re being set up for a prolonged period of missed conditions that then challenges the ECB.  Against this possible game of chicken is the opposite risk that Catalonia may face no choice but to accept conditions, making enforceability a different issue.  Against this concern, and in a written contribution to the German weekly Die Zeit this morning, Draghi reinforced expectations for a bond buying program to be announced next week by again referencing non-standard policy tools:

Yet it should be understood that fulfilling our mandate sometimes requires us to go beyond standard monetary policy tools.

When markets are fragmented or influenced by irrational fears, our monetary policy signals do not reach citizens evenly across the euro area. We have to fix such blockages to ensure a single monetary policy and therefore price stability for all euro area citizens. This may at times require exceptional measures. But this is our responsibility as the central bank of the euro area as a whole.”

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports

Economic Data August 30, 2012 actual v. forecast

Date

 

Currency

 

 

Event

Actual

 

Forecast

 

Previous

Aug. 29

 

AUD

 

 

Construction Work Done (QoQ) 

-0.2%

 

1.0%

 

7.8%

 

 

CHF

 

 

KOF Leading Indicators 

1.57

 

1.50

 

1.41

 

 

EUR

 

 

German CPI (MoM) 

0.3%

 

0.2%

 

0.4%

 

 

EUR

 

 

German CPI (YoY) 

2.0%

 

1.8%

 

1.7%

 

 

USD

 

 

GDP (QoQ) 

1.7%

 

1.7%

 

1.5%

 

 

USD

 

 

Pending Home Sales (MoM) 

2.4%

 

1.0%

 

-1.4%

 

 

USD

 

 

Beige Book 

 

 

 

 

 

 

Upcoming Economic Events that affect the CHF, EUR, GBP and USD

Date

Time

 

Currency

 

 

Event

Forecast

 

Previous

 

 

Aug. 30

08:00

 

DKK

 

 

Danish Unemployment Rate 

4.70% 

 

4.60% 

 

 

 

08:55

 

EUR

 

 

German Unemployment Rate 

6.8% 

 

6.8% 

 

 

 

08:55

 

EUR

 

 

German Unemployment Change 

8K 

 

7K 

 

 

 

13:30

 

USD

 

 

Core PCE Price Index (MoM) 

0.1% 

 

0.2% 

 

 

 

13:30

 

CAD

 

 

Current Account 

-15.0B 

 

-10.3B 

 

 

 

13:30

 

USD

 

 

Personal Spending (MoM) 

0.4% 

 

0.0% 

 

 

 

13:30

 

USD

 

 

Initial Jobless Claims 

370K 

 

372K 

 

 

 

13:30

 

USD

 

 

Continuing Jobless Claims 

3307K 

 

3317K 

   

 

Government Bond Auctions

Date Time Country 

30/8  05:35  Japan

30/8  11:00  Italy 

30/8  19:00  US

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About: FX Empire Analyst - Barry Norman

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