EUR/USD Fundamental Analysis July 6, 2012, Forecast
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Analysis and Recommendations:
The EUR/USD is trading at 1.2382 after falling 0.0146
The ECB cut its main policy rate from 1.0% to 0.75% and the deposit rate from 0.25% to 0.0%, essentially putting a zero bound floor on EONIA. The euro tumbled on the pessimistic remarks in the statement from the ECB Director. Economic data has deteriorated since the last press conference (June 6th) leaving open the possibility that the ECB announces other policy tools, which could include changes to collateral rules or a decision to follow in the BoE’s footsteps with a new funding for lending program. These would likely prove EUR positive as they do not carry the same burden as a QE program would, but they provide some economic benefit.
In other European news, German factory orders were reasonable, increasing 0.6% m/m; while Ireland, for the first time since receiving aid, auctioned €500m in 98-day t-bills, with a yield of 1.8%. Spain also raised capital, auctioning €3bn at 5.086%, below the 5.457% at the June 21st auction. Media attention appears focused on building ties between Germany and Italy; however the most important theme from here is the balancing of European growth with austerity.
The relationship between risk appetite and euro has broken down, providing a healthy and encouraging signal for markets. For several months euro trading and risk appetite were closely correlated; as fears grew over Europe, risk aversion spiked and the USD rallied (the impact of safe haven flows); however over the last few weeks, this relationship has broken down suggesting that developments in Europe are no longer driving the entire market.
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 for July 5, 2012 actual v. forecast
|
Date |
|
Currency |
|
|
Event |
Actual |
|
Forecast |
|
Previous |
|
|
|
|
Jul. 05 |
|
AUD |
|
|
Trade Balance |
-0.28B |
|
-0.50B |
|
-0.03B |
|||
|
|
|
GBP |
|
|
Halifax House Price Index (MoM) |
1.0% |
|
-0.2% |
|
0.4% |
|||
|
|
|
EUR |
|
|
Spanish 10-Year Obligacion Auction |
6.430% |
|
|
|
6.044% |
|
||
|
|
|
EUR |
|
|
German Factory Orders (MoM) |
0.6% |
|
0.2% |
|
-1.4% |
|||
|
|
|
GBP |
|
|
Interest Rate Decision |
0.50% |
|
0.50% |
|
0.50% |
|
||
|
|
|
GBP |
|
|
BOE QE Total |
375B |
|
375B |
|
325B |
|
||
|
|
|
EUR |
|
|
Interest Rate Decision |
0.75% |
|
0.75% |
|
1.00% |
|
||
|
|
|
USD |
|
|
ADP Nonfarm Employment Change |
176K |
|
105K |
|
136K |
|||
|
|
|
USD |
|
|
Initial Jobless Claims |
374K |
|
385K |
|
388K |
|||
|
|
|
EUR |
|
|
ECB Press Conference |
|
|
|
|
|
|
||
|
|
|
USD |
|
|
Continuing Jobless Claims |
3306K |
|
3300K |
|
3302K |
|||
|
|
|
USD |
|
|
ISM Non-Manufacturing Index |
52.1 |
|
53.0 |
|
53.7 |
Upcoming Economic Events that affect the CHF, EUR, GBP and USD
|
Date |
Time |
Currency |
Event |
Forecast |
Previous |
|
Jul 6 |
7:00 |
CHF |
303.8B |
||
|
7:15 |
CHF |
-0.3% |
0.0% |
||
|
8:30 |
GBP |
-2.1% |
-2.5% |
||
|
10:00 |
EUR |
0.3% |
-2.2% |
||
|
12:30 |
USD |
92K |
69K |
||
|
12:30 |
USD |
8.2% |
8.2% |
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