EUR/USD Monthly Fundamental Forecast May 2013

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EUR/USD Monthly Fundamental Forecast May 2013

EUR/USD Monthly Fundamental Forecast May 2013

Outlook and Recommendation

The EUR/USD ended the month on a higher note at 1.3168 after tumbling as low as 1.2747 this month. Five years since the onset of the financial crisis, global growth remains fragile, inflation fears have not materialized and new policy tools continue to be tested. The sense of cautious optimism that developed in early 2013 is now giving way to a growing sense of unease. Economic data have deteriorated in the US, China and Europe, and the economic outlook is complicated by strict fiscal policy and challenged political systems in many of the advanced economies. In response, monetary conditions remain loose but are unable to offset the full fiscal burden. Increasingly, the foreign exchange debate has shifted from the impact of G4 monetary policy (the Bank of Japan, the Bank of England, the Federal Reserve and the European Central Bank) on other economies and currencies to the importance of stimulating growth in the major advanced economies through policy initiatives.

Highest: 1.3201

Lowest: 1.2747

Difference: 0.0454

Average: 1.3034

Change %: 2.44

 

A surprisingly acute drop in inflation, combined with the continued lack of evidence of an impending recovery in the euro zone, is widely expected to be met with policy action by the European Central Bank (ECB) this month. Inflation sunk to 1.2% y/y in April from 1.7% the month before, marking a 38-month low. The decline was sharper than expected and driven by various factors around the currency union, including lower energy prices, base effects and seasonal issues. Nevertheless, it may prompt a further downgrading of the ECB’s inflation projections (currently, the mid-point of the forecast range is 1.6% y/y in 2013 and 1.3% in 2014). With a two-year price outlook that is well under target (“below, but close to, 2%”), the ECB now has ample room to adjust monetary conditions. Speculators should expect a 25 basis point interest rate reduction (to 0.50%) to be complemented by a non-standard policy measure to boost lending activity among small and medium-sized businesses (SME) in the near-term. Given that the monetary transmission mechanism remains impaired, the rate cut is unlikely to do much to materially boost growth

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.

Central Bank: FED and ECB

Central Bank – Fed Reserve

Date of next meeting or last meeting: May 01, 2013

Current Rate: 0.00% – 0.25%

Central Bank Name – European Central Bank

Date of next meeting or last meeting: May 02, 2013

Current Rate: 0.75%

EURUSD 0430M

Economic events for the month of February affecting EUR, CHF, GBP and USD

Date

Time

Currency

Event 

Forecast

Previous

May 1

3:30

GBP

Manufacturing PMI

48.6

48.3

 

7:15

USD

ADP Non-Farm Employment Change

153K

158K

 

9:00

USD

ISM Manufacturing PMI

51.1

51.3

May 2

3:30

GBP

Construction PMI

48.1

47.2

 

6:45

EUR

Minimum Bid Rate

0.50%

0.75%

 

6:45

USD

Trade Balance

-42.1B

-43.0B

 

6:45

USD

Unemployment Claims

345K

339K

May 3

3:30

GBP

Services PMI

52.5

52.4

 

7:30

USD

Non-Farm Employment Change

155K

88K

 

7:30

USD

Unemployment Rate

7.6%

7.6%

 

9:00

USD

ISM Non-Manufacturing PMI

54.1

54.4

May 7

2:00

CHF

Foreign Currency Reserves

 

438.3B

May 8

2:15

CHF

CPI m/m

 

0.2%

 

20:30

CNY

CPI y/y

 

2.1%

May 9

3:30

GBP

Manufacturing Production m/m

 

0.8%

 

6:00

GBP

Asset Purchase Facility

375B

375B

 

6:00

GBP

Official Bank Rate

0.50%

0.50%

May 13

7:30

USD

Core Retail Sales m/m

 

-0.4%

 

7:30

USD

Retail Sales m/m

 

-0.4%

May 14

4:00

EUR

German ZEW Economic Sentiment

 

36.3

May 15

3:30

GBP

Claimant Count Change

 

-7.0K

 

3:30

GBP

BOE Inflation Report

   
 

7:30

USD

PPI m/m

 

-0.6%

May 16

7:30

USD

Building Permits

 

0.90M

 

7:30

USD

Core CPI m/m

 

0.1%

 

7:30

USD

Unemployment Claims

   
 

9:00

USD

Philly Fed Manufacturing Index

 

1.3

May 17

8:55

USD

Prelim UoM Consumer Sentiment

 

76.4

May 21

3:30

GBP

CPI y/y

   

May 22

9:00

USD

Existing Home Sales

   

May 23

2:00

EUR

French Flash Manufacturing PMI

   
 

2:30

EUR

German Flash Manufacturing PMI

   
 

3:30

GBP

Retail Sales m/m

   
 

4:30

GBP

Second Estimate GDP q/q

   
 

7:30

USD

Unemployment Claims

   
 

9:00

USD

New Home Sales

   

May 24

3:00

EUR

German Ifo Business Climate

   
 

7:30

USD

Core Durable Goods Orders m/m

   

May 28

9:00

USD

CB Consumer Confidence

   

May 30

7:30

USD

Prelim GDP q/q

   
 

7:30

USD

Unemployment Claims

   
 

9:00

USD

Pending Home Sales m/m

   

May 31

20:00

CNY

Manufacturing PMI

   

 

 

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About: FX Empire Analyst - Barry Norman

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