EUR/USD Fundamental Forecast – August 1, 2016

The EUR/USD added 38 points to trade at 1.1115 as the greenback fell after the Bank of Japan held rates and did little in the terms of monetary stimulus. In the last week markets have witnessed a number of robust economic datasets from the nation like consumer confidence, unemployment claims, existing home sales and new home sales data. In spite of this, the dollar is trending lower. The reason could be mostly attributed to the Brexit aftershocks along with the PBoC policy and Japanese whispers about helicopter money. Not forgetting the on-off news about the US Presidential elections.

With so many events in play, the dollar has not been able to move higher despite the optimism given by the US Fed about the booming US economy in July’16 FOMC meeting. This will be a wait and watch situation unless all the events unfold and give a clear direction about the path of the global economy. The months ahead will see volatility across all the asset class including the dollar.

Eurostat published CPI inflation for July, which failed to meet estimates. The year-on-year change ticked higher by a notch to 0.2%, but analysts had predicted an improvement to 0.3%. The core gauge stayed at 0.9%. In addition, the euro zone’s unemployment remained at 10.1% for the month of June.

From the US dollar perspective, the first estimate of the US GDP for the second quarter is due and should improve notably to 2.6% from 1.1% in the previous quarter.

“However, we are somewhat concerned over how much of this growth was down to a very strong gain in consumer spending. Personal consumption is expected to have grown by 4.4% on an annualised basis – essentially contributing around 3.0ppt to overall real GDP growth. That strength is unlikely to be sustained which does suggest overall continued subdued economic growth in H2, especially given we may witness the most divisive presidential election in US political history,” analysts at Bank of Tokyo-Mitsubishi wrote on Friday.

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Upcoming Economic Events that you should be monitoring:

Monday, August 1, 2016

Government Bond Auctions

Date/Time Country Type

Aug 2   JPY                  10-Year JGB Auction                          -0.243%

Aug 2   USD                4-Week Bill Auction                           0.270%