EUR/USD Fundamental Analysis July 12, 2012, Forecast

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Analysis and Recommendations:

The EUR/USD is trading at 1.2255. Today’s FOMC minutes release, at 2:00pm EST, will be eagerly awaited by market participants for clues regarding the outlook for monetary policy.  The minutes will detail the deliberation that took place ahead of the June 20th decision to extend operation twist through the end of 2012.  Clues regarding the outlook will arise from the discussion of other, more active measures that some of the more dovish / activist policymakers may have sought to pursue.  Options for additional measures range from extending the existing conditional rate pledge to keep rates low through late 2014, to an extreme of expanding QE to purchases of foreign government debt. The late day release may affect the currency values as markets close.

In other eco new, the U.S. trade deficit narrowed in line with market expectations in May, as exports inched up 0.2% and imports fell 0.7%. The U.S. Bureau of Economic Analysis said that the U.S. trade deficit narrowed to a seasonally adjusted USD48.7 billion in May from deficit of USD50.6 billion in April.

The details of Spain’s banking bailout remain very much a political question, and the European financial press is filling up with conflicting accounts of the form that the bailout will take. Reports vary, but some salient points include: a) An EUR 30bn capital infusion should be forthcoming by July 20, and the 30bn would serve as a ‘contingency reserve’ until the audit of Spain’s banks is complete in September according to EU commissioner for economic affairs Olli Rehn. b) The loan will take the form of ‘rescue bonds’ that will be issued by the EFSF/ESM and be redeemable at the ECB, according to statements by Spain’s Economy Minister de Guindos. c) While Rehn says that the money will directly loaned to banks, German Finance Minister Schaeuble says that the loans will be made to Spain. d) The FT claims to have gotten its hands on a draft of the MoU between Spain and the Eurogroup which says that “Banks and their shareholders will take losses before state aid measures are granted and ensure loss absorption of equity and hybrid capital instruments to the full extent possible.” The implication is that Spain will have to ‘bail-in’ before it gets a bail-out.

Germany’s Federal Constitutional Court is expected to delay its approval of the ESM, the permanent bailout fund set to replace the temporary EFSF.  Wolfgang Schaeuble, the German Finance Minister has warned of a ‘significant worsening of the current crisis’ in the event of a delay, in a hearing that lasted over 10 hours.  German political parties and citizens’ organizations have filed an injunction in order to force the court to investigate whether the ESM undermines democratic rule by transferring authority to Brussels.

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 11, 2012 actual v. forecast

Date

 

Currency

 

 

 

Event

Actual

 

Forecast

 

Previous

 

 

Jul. 11

 

AUD

 

 

 

RBA Assist Gov Lowe Speaks 

 

 

 

 

 

 

 

 

 

KRW

 

 

 

South Korean Unemployment Rate 

3.2%

 

3.2% 

 

3.2% 

 

 

 

 

JPY

 

 

 

Tertiary Industry Activity Index (MoM) 

0.7%

 

0.2% 

 

-0.2% 

   

 

 

AUD

 

 

 

Westpac Consumer Sentiment 

3.70%

 

 

 

0.30% 

 

 

 

 

AUD

 

 

 

Home Loans (MoM) 

-1.2%

 

0.7% 

 

0.5% 

   

 

 

EUR

 

 

 

German CPI (MoM) 

-0.1%

 

-0.1% 

 

-0.1% 

 

 

 

 

EUR

 

 

 

German CPI (YoY) 

1.7%

 

1.7% 

 

1.7% 

 

 

 

 

EUR

 

 

 

German 10-Year Bund Auction 

1.310%

 

 

 

1.520% 

 

 

 

 

CAD

 

 

 

Trade Balance 

-0.8B

 

-1.0B 

 

-0.6B 

   

 

 

USD

 

 

 

Trade Balance 

-48.7B

 

-48.5B 

 

-50.6B 

   

 

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

Date

Time

Currency

 Event

Previous

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 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

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