EUR/USD Monthly Fundamental Forecast September 2012

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Outlook and Recommendation

The EUR/USD closed August at 1.2577. This is a difficult month to sum up, with Mr. Draghi’s pledge to save the euro and Mr. Bernanke closing the month with his Jackson Hole address on the 31st leaving markets skewed waiting for FOMC and ECB meeting later in the month.

Highest: 1.2637

Lowest: 1.2134

Difference: 0.0503

Average: 1.2401

Change %: 2.76

Central bank intervention, growth stimulus in China, persistently strong European financial market stress, speculative trading dynamics in commodity markets and uneven directional shifts in emerging-market assets are some of the primary factors swaying capital flows in foreign exchange markets. The US dollar (USD) has been under pressure following three consecutive months of gains versus other major currencies, with the exception of the Japanese yen (JPY).

The US economy continues to struggle to address prolonged weakness in employment conditions, despite timid improvement in leading job-market indicators over the past few months. Recent data on jobless claims and still high unemployment levels indicate a relatively fragile outlook for consumption activity. The USD may be on the defensive as monetary authorities remain committed to maintaining a near-zero short-term interest rate environment and to its large-scale asset (US Treasury and Mortgage-based securities) purchase program aimed at depressing long-term funding costs for both the government and mortgage borrowers. Currency markets will be impacted materially by the mid-September Federal Reserve decision on further asset purchases (so-called QE3). The US fiscal outlook is complicated by the November election.

Event risk in the Eurozone looms and has skewed the risk return profile of EUR. Sentiment has improved but remains bearish with both risk reversals and CFTC positioning suggesting there has been significant short covering. Historically, September has proven the most volatile month of the year, averaging an absolute return of 4%. Fundamentally, the outlook is weak; however it is also a challenge to build in a sustainably stronger USD profile

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 Name: European Central Bank and the US Federal Reserve

Current Rate: 0.750% and 0.25%

Date of next meeting or last meeting: 09/06/2012 (ECB) 09/13/2012 (FOMC)

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

Date

Time

Currency

 

Forecast

Previous

Sep 1

2:00

CNY

Manufacturing PMI

49.8

50.1

Sep 3

 8:15

CHF

Retail Sales y/y

4.5%

3.7%

 

9:30

GBP

Manufacturing PMI

46.2

45.4

Sep 4

9:30

GBP

Construction PMI

50.1

50.9

 

15:00

USD

ISM Manufacturing PMI

50.1

49.8

Sep 5

8:15

CHF

CPI m/m

0.1%

-0.5%

 

9:30

GBP

Services PMI

51.5

51.0

Sep 6

12:00

GBP

Asset Purchase Facility

375B

375B

 

12:00

GBP

Official Bank Rate

0.50%

0.50%

 

13:15

USD

ADP Non-Farm Employment Change

141K

163K

 

13:30

EUR

ECB Press Conference

  
 

13:30

USD

Unemployment Claims

369K

374B

 

15:00

USD

ISM Non-Manufacturing PMI

52.6

52.6

Sep 7

8:00

CHF

Foreign Currency Reserves

 

408.6B

 

9:30

GBP

Manufacturing Production m/m

2.1%

-2.9%

 

9:30

GBP

PPI Input m/m

1.6%

1.3%

 

13:30

USD

Non-Farm Employment Change

121K

163K

 

13:30

USD

Unemployment Rate

8.3%

8.3%

Sep 9

2:30

CNY

CPI y/y

 

1.8%

Sep 10

Tentative

CNY

Trade Balance

 

25.1B

Sep 11

13:30

USD

Trade Balance

 

-42.9B

Sep 12

9:30

GBP

Claimant Count Change

 

-5.9K

Sep 13

8:30

CHF

Libor Rate

<0.25%

<0.25%

 

13:30

USD

PPI m/m

 

0.3%

 

13:30

USD

Unemployment Claims

  
 

17:30

USD

FOMC Statement

  
 

19:15

USD

FOMC Press Conference

  

 

Sep 14

13:30

USD

Core CPI m/m

 

0.1%

 

13:30

USD

Retail Sales m/m

 

0.8%

 

14:55

USD

Prelim UoM Consumer Sentiment

 

74.3

Sep 18

9:30

GBP

CPI y/y

  
 

9:30

GBP

Public Sector Net Borrowing

  
 

10:00

EUR

German ZEW Economic Sentiment

  
 

Tentative

GBP

BOE Inflation Letter

  

Sep 19

9:30

GBP

MPC Meeting Minutes

  
 

13:30

USD

Building Permits

  
 

15:00

USD

Existing Home Sales

  

Sep 20

3:30

CNY

HSBC Flash Manufacturing PMI

  
 

8:30

EUR

German Flash Manufacturing PMI

  
 

9:30

GBP

Retail Sales m/m

  
 

13:30

USD

Unemployment Claims

  
 

15:00

USD

Philly Fed Manufacturing Index

  

Sep 24

9:00

EUR

German Ifo Business Climate

  

Sep 25

15:00

USD

CB Consumer Confidence

  

Sep 26

15:00

USD

New Home Sales

  

Sep 27

9:30

GBP

Current Account

  
 

13:30

USD

Core Durable Goods Orders m/m

  
 

13:30

USD

Unemployment Claims

  
 

15:00

USD

Pending Home Sales m/m

  
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