EUR/USD Fundamental Forecast – August 29, 2016

The EUR/USD gained 8 points in the Asian session but otherwise has remained flat as many traders are on holiday leading into Summer Bank holiday while others are on edge ahead of Janet Yellen’s speech due in a few hours. The currency is trading at 1.1290. In an article published on Marketwatch covering the CNBC interview with Fed Bullard said that The Federal Reserve’s forecast of gradual rate hikes is damaging the economy and the central bank’s credibility, said St. Louis Fed President James Bullard on Friday.

In an interview on CNBC, Bullard stuck to his forecast of one rate hike over the next two-and-a-half years.

Bullard, who is a voting member on the Fed’s policy committee this year, said he was “agnostic” about exactly when the Fed should take that one step but did not seem eager to move at the September meeting.

Bullard said he thought it would be best to raise interest rates after there had been some “good news about the economy.” While there have been two good jobs reports, “year-over-year GDP growth rate is very low,” he noted.

The St. Louis Fed head said he was trying to “break down” the Fed’s “on-the-cusp-of-200-basis- points story” for interest rates over the same forecast horizon. Asked if he believed the Fed’s forecast was damaging the economy, Bullard replied, yes.

“I think that it is hurting our credibility. By the end of this year, we’ll be two years into the process since [quantitative easing] ended, maybe have moved twice at this point. So I think that is affecting global pricing. You’ve got this policy divergence story that has been in FX markets for a long time here,” he said.

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August 29, 2016

Government Bond Auctions

Date Time Country Auction

Aug 25 18:00 US Holds 7yr note auction

Aug 26 10:10 Italy Holds zero coupon