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EUR/USD Fundamental Forecast – July 26, 2016

By:
Barry Norman
Published: Jul 25, 2016, 10:50 UTC

The EUR/USD added 14 points to trade at 1.0990 but remains bearish after a vanilla response from the ECB and Mario Draghi. Traders are now looking forward

EUR/USD Fundamental Forecast – July 26, 2016

The EUR/USD added 14 points to trade at 1.0990 but remains bearish after a vanilla response from the ECB and Mario Draghi. Traders are now looking forward to the Fed meeting this week.  There is a deluge of high profile events that can charge explosive volatility for individual currencies and many that can readily prove contagion for global investor sentiment. Growth will be a particularly common theme amid the data scheduled for release, but financial stability amid floundering monetary policy will be the most incisive threat.

In the long list of important events to keep track of this coming week, the docket item likely to attract the most press is Wednesday’s FOMC rate decision. Given the central bank’s hesitance at the June meeting and global markets retaining a sense of uncertainty, a hike is very unlikely. That said, rhetoric that supports a conviction to normalize can carry significant influence – not through expectations of some meager yield advantage, but rather the perception that the US represents one of the few areas where conditions are stable enough to invest. The US 2Q GDP reading will further color that perception for better or worse.

While the US docket may earn the most headline space, more significant market swells are likely to be follow the Japanese and Euro-area events. For Euro traders, a long list of data through the week builds to a Friday crescendo with the release of Eurozone (and some members’) 2Q GDP figures.

Given the aggressive easing effort of the ECB and the rise of anti-Euro and anti-EU sentiment, this data is dangerously positioned to add fuel to fires. Perhaps more decisive though is the ECB’s Bank Stress Test results with Italy’s banking system frequent top headline.

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Upcoming Economic Events that you should be monitoring:

Tuesday, July 26, 2016

Country Name Volatility Previous
NZD Imports 2 4.22
NZD Exports 2 4.57
NZD Trade Balance (YoY) 2 -3.633
NZD Trade Balance (MoM) 2 358
GBP Inflation Report Hearings 3
USD S&P/Case-Shiller Home Price 2 5.4
USD Markit Services PMI 2 51.4
USD Markit PMI Composite 2 51.2
USD Consumer Confidence 2 98
USD New Home Sales Change (MoM) 2 -6
USD New Home Sales (MoM) 2 0.551

Government Bond Auctions

Date/Time Country Type

Jul 25 11:30 Germany Eur 1.5bn Jul 2017 Bubill

Jul 25 17:20 Italy Announces details of bond auction

Jul 26 11:10 Italy Holds zero-coupon/BTP€i auction

Jul 27 11:30 Germany Eur 1bn 2.5% Aug 2046 Bund

Jul 28 11:10 Italy Holds bond auction

 

 

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