EUR/USD Fundamental Analysis July 17, 2012, Forecast

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Analysis and Recommendations:

The EUR/USD is trading at 1.2240 after making a huge comeback. The euro had tumbled as low as 1.2176 today and it looked to go lower, until US sales figures shook the markets. The euro climbed back to close to its opening for the day. ( see chart below )

Markets are playing defense ahead of a high risk week for key data, earnings and policy risk focused upon the US economy. 

European equities are mixed but generally gently lower, as are Dow futures, and key commodities are trading in the red.  Treasuries and bunds are rallying, while Spanish and Italian 10s sell off somewhat and remain at unsustainably high yields. 

There are few fresh catalysts.  A pair of comments over the weekend may have contributed toward a bit of early week jitters.  German Chancellor Angela Merkel noted that “All of these attempts will have no chance with me or with Germany” when referencing attempts by some of her European counterparts to stall movements in favor of increased central control over banking oversight and fiscal policy.

Chinese Premier also contributed to the sour mood by noting that “It should be clearly understood that the momentum for a stable rebound in the economy has not yet been established,” which may be taken to mean that authorities believe growth to be either flat-lining at weak levels or facing additional downside pressures in contrast to hopes for a growth rebound as soon as the current quarter.

The IMF releases forecast updates for global growth today but the data has already been leaked so no surprises there. 

The final pass on Eurozone CPI was released today, revising monthly CPI lower in the initial estimate released on June 29. The year-on-year number was unchanged at 1.6%. The main point is that inflation is falling globally not only due to volatility in energy costs, but due to softer underlying price growth.

The Eurozone trade balance improved to +€6.3bn in May from €4.5bn in April (seasonally adjusted). The gain was mainly attributable to falling imports, which decreased by 0.9% m/m, probably a reflection of weaker domestic demand seeing as the euro did not fare well in May, with EURUSD falling from 1.32 at the start of the month to 1.24 at month-end That said, there is normally a 1-2 month lag in the effects of currency fluctuations on trade and the euro has continued to fall since May, with EURUSD pricing below  1.22 as we went to print, so the effects of euro volatility on Eurozone trade should continue to be felt over the coming months.

All that said, the big event of the week will be Fed Chairman’s Bernanke’s testimony before the US congress where he is expected to give a run down the economic situation and the intentions of the Fed. Stay turned and join the markets playing the Bernanke Bounce..

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 Releases for Monday, July 16, 2012 actual v. forecast

Date

 

Currency

 

 

 

Event

Actual

 

Forecast

 

Previous

 

 

Jul. 16

 

GBP

 

 

 

Rightmove House Price Index (MoM) 

-1.7%

 

 

 

1.0% 

 

 

 

 

EUR

 

 

 

CPI (YoY) 

2.4%

 

2.4% 

 

2.4% 

 

 

 

 

EUR

 

 

 

Core CPI (YoY) 

1.6%

 

1.6% 

 

1.6% 

 

 

 

 

USD

 

 

 

Core Retail Sales (MoM) 

-0.4%

 

0.1% 

 

-0.4% 

 

 

 

 

CAD

 

 

 

Foreign Securities Purchases 

26.11B

 

13.50B 

 

10.16B 

 

 

 

 

USD

 

 

 

Retail Sales (MoM) 

-0.5%

 

0.2% 

 

-0.2% 

 

 

 

 

USD

 

 

 

NY Empire State Manufacturing Index 

7.4

 

4.0 

 

2.3 

 

 

 

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

Date

Time

Currency

 Event

Previous

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

Upcoming Government Bond Auctions

Date  Time  Country  Auction

Jul 17  08:30  Spain    Eur 2.5-3.5bn Jul 2013 (12M) & Dec 2013 (18M) T-bills

Jul 17  09:10  Greece  Eur 1.25bn Oct 2012 (3M) T-bills

Jul 17  09:30  Belg     Up to Eur 3.0bn Oct 2012 (3M) & Jul 2013 (12M) T-bills

Jul 17  10:00  EFSF    Up to Eur 1.5bn Jan 2013 (6M) T-bills

Jul 18  09:30  Ger       Eur 5.0bn 0.00% Jun 2014 Schatz

Jul 18  09:30  Port      Eur 1.75-2.0bn new Jan 2013 (6M) & new Jul 2013 (12M)

Jul 19  00:30  Japan    Auctions 5Y JGBs

Jul 19  08:30  Spain    Eur 2.0-3.0bn 3.3% Oct 2014 Bono, 5.5% Jul 2017 &

Jul 19  08:50  France  Eur 8.0-9.0bn 2.5% Jan 2015, 2.5% Jul 2016 & new 1.0%

Jul 19  09:30  UK       GBP 1.75bn 3.75% Jul 2052 Gilt

Jul 19  09:50  France  Eur 1.0-1.5bn 1.3% Jul 2019 OATi,

Jul 19  17:00  US        USD 15.0bn 10Y Tips

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