EUR/USD Fundamental Analysis October 1, 2012 Forecast

Posted September 28, 2012 15:54 (GMT) | By FX Empire Analyst - Barry Norman | Print | Font Size
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Analysis and Recommendations:

The EUR/USD continued to decline today, trading at 1.2869. The euro was weak as traders continued to worry about the problems in Spain. The release of stronger than expected German retail sales (+0.3%m/m) and Eurozone CPI (+2.7%) have also supported EUR.

Current headlines are important; however are adding substantially to general noise. What is important for EUR is: 1) The ECB has decreased tail risk of an EMU breakup through the OMT; 2) Europe has decreased the tail risk of a banking sector collapse through progress towards a banking union; and 3) the key drivers in the near-term are central bank policy and the growth outlook. We have updated our EUR forecast to reflect this; increasing our target for Q412 to 1.26 and leaving our target for Q413 unchanged at 1.21 The next major event is the ECB on October 4th; however today’s expected Spanish update from Moody’s as well as the release of the Spanish bank stress test could provide a knee-jerk reaction in EUR.

Spain’s budget met expectations and previous promises for bringing the deficit to GDP ratio to 4.5% in 2013, with the majority of the changes on the spending side, but also a lottery tax and a new fiscal council to implement reforms; however markets are skeptical that Spain will be able to meet these targets with growth falling faster than government forecasts which suggest. Today France will present an aggressive budget, which will likely include €30bn of cuts in order to bring the deficit to GDP ratio to 3.0% in 2013.

Lackluster data in the US did not seem to have any effect on the pair. Consumer Sentiment tumbled along with Chicago PMI which dropped below 50.

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 September 28, 2012 actual v. forecast

Date

Currency

Event

Actual

Forecast

Previous

Sep. 28

KRW

South Korean Industrial Production (YoY)

0.3%

0.4%

0.2%

JPY

Unemployment Rate

4.2%

4.3%

JPY

Tokyo Core CPI (YoY)

-0.4%

-0.3%

-0.5%

JPY

Industrial Production (MoM)

-1.3%

-0.5%

-1.0%

JPY

Retail Sales (YoY)

1.8%

-0.2%

-0.8%

EUR

French GDP (QoQ)

0.0%

0.0%

EUR

French Consumer Spending (MoM)

0.4%

-0.1%

0.4%

CHF

KOF Leading Indicators

1.67

1.57

1.59

EUR

CPI (YoY)

2.7%

2.4%

2.6%

USD

Core PCE Price Index (MoM)

0.1%

0.1%

CAD

GDP (MoM)

0.2%

0.2%

0.1%

USD

Personal Spending (MoM)

0.5%

0.5%

0.4%

USD

Chicago PMI

49.7

53.0

USD

Michigan Consumer Sentiment

78.3

79.0

79.2

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

Date	Time	Currency	Event	Forecast	Previous
Oct. 01	08:15	CHF	Retail Sales (YoY)	5.0%	3.2%
	08:30	CHF	SVME PMI	47.0	46.7
	15:00	USD	ISM Manufacturing Index	49.8	49.6

Government Bond Auction

Date Time Country

Oct 01 10:00 Norway

Oct 02 09:15 Austria

Oct 02 09:30 Belgium

Oct 02 09:30 UK

Oct 02 14:30 UK

Oct 03 09:10 Sweden

Oct 03 10:00 Norway

Oct 04 08:30 Spain

Oct 04 08:50 France

Oct 04 15:00 US

Oct 05 15:30 Italy

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About: FX Empire Analyst - Barry Norman

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.com

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