EUR/USD Fundamental Forecast – June 2016

The EUR/USD closed the month at 1.1141 and remained in a fairly tight range for the month against a strong US dollar as Fed rate increases dominate the market theme.  Turning to the US dollar, it has encountered a resurgence of buying demand following a complete reversal in expectations for a US interest rate rise from the Fed as early as this summer. The euro dipped 2.80% this month but is trading up 2.59% year to date.  The euro has remained in the upper 111 to 112 range and is expected to remain within this range for most of the month outside of temporary volatility.

“It was only a couple of weeks ago that the market expectations for a US rate rise for June had fallen close to zero and this resulted in the Greenback being flattened,” says Jamel Ahmad, chief market analyst at FXTM, an international online forex broker.

Europe’s economy is finally showing signs of increasing strength, after years of sluggishness and false starts. And that means the European Central Bank likely won’t have to step up its ongoing 1.74 trillion-euro ($1.93 trillion) stimulus program when it meets this week.

Fear not — the chief monetary authority for the countries that use the euro will go on pumping newly printed money into the European economy in an effort to raise inflation. But that’s only due to measures that were decided at previous meetings, and which are either still running or just now being implemented.

So analysts don’t expect any new stimulus jolts to be announced at Thursday’s meeting of the bank’s 25-member governing council in Vienna. There’s little sign that President Mario Draghi and Co. are ready to drop more stimulus news. Some economists are saying don’t expect anything more for the rest of this year, if at all.

The ECB is holding steady just as the U.S. Federal Reserve seems to be moving close to a rate increase at its June meeting. It hiked its key rate in December from near zero to a range between 0.25 percent and 0.5 percent, but then held off any more increases amid unsettling swings in stock markets. Global jitters seem to have eased since then. The U.S. recovery is more advanced; so Fed chief Janet Yellen can contemplate withdrawing some stimulus. (AP)

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 recent analysis and information in our weekly reports and we provide daily updates and outlooks.

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