EUR/USD Fundamental Analysis July 11, 2012, Forecast

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Analysis and Recommendations:

The EUR/USD continues to be weak, trading at 1.2257 as global sentiment turns negative on the EU. Last week there was elation in the markets with the hopes of action by the EU Ministers and each day, it diminishes a bit more. This week’s meeting with the Eurogroup was supposed to be the call to action, to begin the launch of the bank plan, instead, very little is moving forward.

Finance ministers in Europe have agreed to make €30bn available to Spain’s financial sector by the end of July.  According to officials, the loans will not require a sovereign guarantee, and thus will not add to the Spanish government’s contingent liabilities.  However, mixed messages have already surfaced, with Germany’s finance minister Schaeuble saying that the Spanish government would be initially liable.  The loans will be provided to a Spain’s bailout fund ‘Frob’ – meaning that the government will indeed be liable initially.  Funds will come from the EFSF (to then be transferred to the ESM) and will have maturities ranging between 12.5 and 15 years. 

Finally, the ministers have also provided leniency with regards to Spain’s deficit targets, helping PM Rajoy deal with an issue that was identified in early March.

Yesterday’s quarterly testimony from ECB President Draghi to the European Parliament’s economic and monetary committee generated an important discussion on the future path for the EU.  In a three step process, Draghi indicated that (1) unified banking oversight would be followed by (2) fiscal union, resulting in (3) a reduction of imbalances, paving the way for euro bonds over the course of a multi-year process.  With regards to the size of the EFSF / ESM, Draghi was confident that the ‘firepower’ was sufficient to deal with the region’s issues, and with regards to publishing additional details (specifically, meeting minutes) Draghi pushed back, stating that he thought it best to preserve national identities.

Across the pond as they say, more and more support for the USD strengthens the greenback as traders are now expecting the Fed’s to supply additional stimulus in the near future to help jumpstart the stalled US economy, after the poor jobs report last Friday

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 July 10, 2012 actual v. forecast

Date

 

Currency

 

 

 

Event

Actual

 

Forecast

 

Previous

 

 

Jul. 10

 

GBP

 

 

 

RICS House Price Balance 

-22%

 

-16% 

 

-17% 

  

 

 

AUD

 

 

 

NAB Business Confidence 

-3

 

 

 

-2 

 

 

 

 

CNY

 

 

 

Chinese Trade Balance 

31.73B

 

21.00B 

 

18.70B 

 

 

 

 

DKK

 

 

 

Danish CPI (YoY) 

2.20%

 

2.20% 

 

2.10% 

 

 

 

 

NOK

 

 

 

Norwegian Core Inflation (MoM) 

-0.30%

 

0.10% 

 

0.40% 

 

 

 

 

NOK

 

 

 

Norwegian CPI (MoM) 

-0.50%

 

-0.10% 

 

0.00% 

 

 

 

 

GBP

 

 

 

Industrial Production (MoM) 

1.0%

 

-0.2% 

 

-0.4% 

  

 

 

GBP

 

 

 

Manufacturing Production (MoM) 

1.2%

 

0.1% 

 

-0.8% 

  

 

 

GBP

 

 

 

Trade Balance 

-8.4B

 

-9.0B 

 

-9.7B 

  

 

 

GBP

 

 

 

Industrial Production (YoY) 

-1.6%

 

-2.1% 

 

-2.0% 

  

 

 

CAD

 

 

 

Housing Starts 

222.7K

 

205.0K 

 

217.4K 

  

 

 

GBP

 

 

 

NIESR GDP Estimate 

-0.2%

 

 

 

0.1% 

  

 

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

Date

Time

Currency

 Event

Previous

Jul 11

12:30

USD

Trade Balance

-50.1B

14:30

USD

Crude Oil Inventories

-4.3M

Jul 12

9:00

EUR

Industrial Production m/m

-0.8%

12:30

USD

Unemployment Claims

 

12:30

USD

Import Prices m/m

-1.0%

18:00

USD

Federal Budget Balance

-124.6B

7:15

CHF

PPI m/m

-0.2%

Jul 13

12:30

USD

PPI m/m

-1.0%

13:55

USD

Prelim UoM Consumer Sentiment

73.2

Government Bond Auctions

Date  Time  Country 

Jul 11  09:30  Germany

Jul 11  09:30  Swiss

Jul 11  17:00  US

Jul 12  09:10  Italy

Jul 12  09:30  UK

Jul 12  15:00  US

Jul 12  17:00  US

Jul 13  09:10  Italy

Jul 13  10:00  Belgium 

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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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