EUR/USD Fundamental Analysis July 16, 2012, Forecast

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Analysis and Recommendations:

The EUR/USD continues to be weak, trading at 1.2182. With the exception of Moody’s downgrade on Italy, news flow and fundamental releases have been light. Early in the Asian session, Moody’s cut its rating on Italy from A3 to Baa2, outlook negative. Citing the risk of a sharp increase in its funding costs based on increasingly fragile market confidence, contagion risk and an eroding non-domestic investor base as well as the deterioration in Italy’s economic outlook. Moody’s also cites the size of the EFSF/ESM, noting that “there is a limit to the extent to which these support mechanisms can be used to backstop such a large, systemically important sovereign”.

This brings Moody’s rating to the lowest, with S&P rating Italy BBB+ and Fitch at A-, both with negative outlooks. EUR’s response was relatively small (as was the bond market’s), with EUR dropping less than 30 points on the headlines, but then recovering all of its losses just a few hours later. Downward pressure on EURUSD remains relatively consistent, something that could be characterize as a slow trend lower.

Market sentiments were sanguine after China reported the slowest expansion in three years, fuelling speculation that policy makers could prop up additional stimulus measures. But, slew of data from China this morning is calling for a ground reality check that a hard landing could become inevitable for the economy.  In spite of this, markets continue to remain under the grips of fear pertaining to slowing global growth and spreading debt contagion in the Euro region. Being the black Friday the 13th, markets could witness thin volumes and could remain tangential. 

PPI reported higher than forecast, giving an added bump to the already strong USD.

 Overall, the week was thin on volumes with no real market moves. Now the focus shifts to the Fed chairman Bernanke’s testimony before the senate on monetary policy next week.

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 13, 2012 actual v. forecast

Date

Time

 

Currency

 

Importance

 

Event

Actual

 

Forecast

 

Previous

 

 

Jul. 13

03:00

 

CNY

 

 

 

Chinese Fixed Asset Investment (YoY) 

20.4%

 

20.1% 

 

20.1% 

 

 

 

03:00

 

CNY

 

 

 

Chinese GDP (YoY) 

7.6%

 

7.6% 

 

8.1% 

 

 

 

03:00

 

CNY

 

 

 

Chinese Industrial Production (YoY) 

9.5%

 

9.8% 

 

9.6% 

 

 

 

03:00

 

CNY

 

 

 

Chinese Retail Sales (YoY) 

13.7%

 

13.5% 

 

13.8% 

 

 

 

05:30

 

JPY

 

 

 

Industrial Production (MoM) 

-3.4%

 

-3.1% 

 

-3.1% 

 

 

 

08:15

 

CHF

 

 

 

PPI (MoM) 

-0.3%

 

-0.4% 

 

-0.2% 

 

 

 

10:30

 

EUR

 

 

 

Italian 10-Year BTP Auction 

5.82%

 

 

 

6.19% 

 

 

 

13:30

 

USD

 

 

 

Core PPI (MoM) 

2.0% 

 

0.2% 

 

0.2% 

 

 

 

13:30

 

USD

 

 

 

PPI (MoM) 

1.0% 

 

-0.5% 

 

-1.0% 

 

 

 

14:55

 

USD

 

 

 

Michigan Consumer Sentiment 

 

 

73.4 

 

73.2 

  

 

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

Date

Time

Currency

 Event

Forecast

Previous

Jul 16

7:15

CHF

Industrial Production q/q

-7.5%

8.8%

9:00

EUR

CPI y/y

 

2.4%

12:30

USD

Retail Sales m/m

 

-0.2%

12:30

USD

Empire State Manufacturing Index

 

2.3

14:00

USD

Business Inventories m/m

 

0.4%

Jul 17

8:30

GBP

CPI y/y

 

2.8%

9:00

EUR

German ZEW Economic Sentiment

 

-16.9

9:15

ALL

G7 Meetings

  

12:30

USD

CPI m/m

 

-0.3%

13:00

USD

TIC Long-Term Purchases

 

25.6B

13:15

USD

Industrial Production m/m

 

-0.1%

Jul 18

8:30

GBP

Claimant Count Change

 

8.1K

8:30

GBP

Unemployment Rate

 

8.2%

9:00

CHF

ZEW Economic Expectations

 

-43.4

12:30

USD

Building Permits

 

0.78M

12:30

USD

Housing Starts

 

0.71M

14:30

USD

Crude Oil Inventories

 

-4.7M

Jul 19

6:00

CHF

Trade Balance

 

2.48B

8:00

EUR

Current Account

 

4.6B

8:30

GBP

Retail Sales m/m

 

1.4%

12:30

USD

Unemployment Claims

  

14:00

USD

Existing Home Sales

 

4.55M

14:00

USD

Philly Fed Manufacturing Index

 

-16.6

Jul 20

6:00

EUR

German PPI m/m

 

-0.3%

8:30

GBP

Public Sector Net Borrowing

 

15.6B

 

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About:FX Empire Analyst - Barry Norman

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