EUR/USD Fundamental Analysis August 31, 2012, Forecast

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Analysis and Recommendations:

The EUR/USD is trading at 1.2550. Markets are quiet, almost paralyzed, waiting for Chair Bernanke’s comments on Friday; this has left FX markets trading in relatively tight ranges in the Asian and European sessions. However, the returns still suggest underlying themes in markets: 1) commodity currencies are weak as the global growth outlook deteriorates; 2) EUR is strong, as market participants continue to square positioning ahead of event risk; 3) the non-EUR, European currencies of NOK, SEK and GBP are mid-performers, benefitting from building hope for Europe.

Beyond Jackson Hole, the focus today has been on French PM Hollande’s meeting with Spanish PM Rajoy, helping to fuel speculation that Spain is one step closer to requesting aid. Chancellor Merkel’s visit to China and Premier Wen’s comments, that he is more confident after meeting with Chancellor Merkel, have proven vaguely EUR positive. Meanwhile, US politics continue to be the headline, while hurricane Isaac has been downgraded to a tropical storm and taken some pressure off of oil prices.

Building inflationary pressures will complicate the decisions by the ECB and are likely to intensify the German/ECB discussions. Yesterday, German CPI came in above expectations at 0.3%m/m and 2.2%y/y; while today Spain’s preliminary CPI jumped to a nine-month high of 2.7%y/y.

German unemployment rose for the fifth month in a row; however on a year-to-date basis unemployment is only down 11k, virtually flat; while the unemployment rate has been absolutely steady at its 20-year low of 6.8% since December 2011.

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. 30

 

JPY

 

 

Retail Sales (YoY) 

-0.8%

 

-0.2% 

 

0.2% 

 

 

 

 

AUD

 

 

Building Approvals (MoM) 

-17.3%

 

-5.0% 

 

-1.0% 

  

 

 

AUD

 

 

Private New Capital Expenditure (QoQ) 

3.4%

 

2.4% 

 

7.7% 

  

 

 

DKK

 

 

Danish Unemployment Rate 

4.70%

 

4.70% 

 

4.60% 

 

 

 

 

EUR

 

 

German Unemployment Rate 

6.8%

 

6.8% 

 

6.8% 

 

 

 

 

EUR

 

 

German Unemployment Change 

9K

 

8K 

 

9K 

  

 

 

EUR

 

 

Italian 10-Year BTP Auction 

5.82%

 

 

 

5.96% 

 

 

 

 

USD

 

 

Core PCE Price Index (MoM) 

0.0%

 

0.1% 

 

0.2% 

 

 

 

 

CAD

 

 

Current Account 

-16.0B

 

-15.0B 

 

-10.2B 

  

 

 

USD

 

 

Personal Spending (MoM) 

0.4%

 

0.4% 

 

0.0% 

 

 

 

 

USD

 

 

Initial Jobless Claims 

374K

 

370K 

 

374K 

  

 

 

USD

 

 

Continuing Jobless Claims 

3316K

 

3307K 

 

3321K 

  

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

Date

Time

Currency

Event

Forecast

Previous

Aug.31 

07:00

GBP

Nationwide HPI (MoM) 

0.1% 

-0.7% 

 

10:00

EUR

CPI (YoY) 

2.5% 

2.4% 

 

14:45

USD

Chicago PMI 

53.5 

53.7 

 

14:55

USD

Michigan Consumer Sentiment 

73.6 

73.6 

Government Bond Auctions

Aug 31  14:30  UK  Publication of the Q4 Gilt operations calendar

Sep 03  09:10  Norway  Bond auction

Sep 03  10:00  Belgium  OLO auction

Sep 04  00:30  Japan  Auctions 10Y JGBs

Sep 04  09:15  Austria  Bond auction

Sep 04  09:30  Belgium  Auctions Dec 2012 (3M) & Feb 2013 (6M) T-bills

Sep 04  14:30  UK  Details 0.75% 2034 I/L Gilt & 1.75% Sep 2022 Gilt on Sep

Sep 05  09:10  Sweden  Nominal bond auction

Sep 05  09:30  Germany  Eur 5.0bn Sep 2022 Bund auction

Sep 05  09:30  UK  4.5% 2042 Gilt auction

Sep 06  00:30  Japan  Auctions 30Y JGBs

Sep 06  08:30  Spain  Bono auction

Sep 06  08:50  France  OAT auction

Sep 06  09:10  Sweden  I/L bond auction

Sep 06  15:00  US  Announces 3Y Notes on Sep 11, 10Y Notes on Sep 12 &

Sep 07  15:30  Italy

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About:FX Empire Analyst - Barry Norman

Barry produces a private Daily Market Review newsletter that is distributed around the globe to over 25,000 subscribers and recently published a book on Options Trading that is available from amazon.com

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