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..
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Economic Data Releases for Monday, July 16, 2012 actual v. forecast
Rightmove House Price Index (MoM)
Core CPI (YoY)
Core Retail Sales (MoM)
Foreign Securities Purchases
Retail Sales (MoM)
NY Empire State Manufacturing Index
Upcoming Economic Events that affect the CHF, EUR, GBP and USD
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
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.comView all of FX Empire Analyst - Barry Norman's Articles