EUR/USD Fundamental Forecast – August 24, 2016

The EUR/USD showed little reaction to better than expected services and composite PMI data today. The euro was trading up 25 points prior to the releases and remained at 1.1345 near the top of its range as the US dollar continued to fall. Manufacturing PMI missed expectations printing slightly lower but well above the 50 divider line.

The Eurozone economy maintained its momentum in August, with growth showing little sign of being curtailed by fallout from the U.K.’s Brexit vote.

A composite Purchasing Managers Index for the 19-nation region rose for a second month to 53.3 from 53.2 in July. That’s above the 50 level that divides expansion from contraction and marks the best reading in seven months.

IHS Markit said its report shows the euro-zone economy remains on a “steady growth path,” though it noted that inflation remains muted and services confidence dipped this month. It estimates GDP growth of about 0.3 percent this quarter, similar to the average of the first half of the year.

The main event of the week, as far as the greenback is concerned, arrives on Friday, when Federal Reserve chairwoman Janet Yellen will speak at the annual Jackson Hole Symposium. The speech will be closely monitored by investors, particularly as the event that she will be speaking at has previously been the platform for the Fed Chair to warn of upcoming loosening or tightening of monetary policy

“Yellen will have to be careful to deliver a very blunt warning of such an event to the markets,” said Oanda’s senior market analyst Craig Erlam.

“Markets have previously pounced on any uncertainty in the statements of the Fed when hinting at rate hikes and Yellen needs to be careful not to make the same mistake again, assuming of course that this is the message she wants to get across.”

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Upcoming Economic Events that you should be monitoring:

August 24, 2016

Government Bond Auctions

Date Time Country Auction

Aug 24 10:03 Sweden Holds bond auction

Aug 24 10:30 Germany Eur 4bn 0% Oct 2021 Bobl

Aug 24 18:00 US Holds 2yr FRN auction & 5yr note auction

Aug 25 18:00 US Holds 7yr note auction

Aug 26 10:10 Italy Holds zero coupon