EUR/USD Weekly Fundamental Analysis – February 8-12, 2016 -Forecast

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Published: Feb 6, 2016, 06:16 UTC

Weekly Analysis and Recommendation: The EUR/USD rallied last week gaining 2.93% as the US dollar tumbled on updated Federal Reserve forecasts. The euro

Weekly Analysis and Recommendation:

The EUR/USD rallied last week gaining 2.93% as the US dollar tumbled on updated Federal Reserve forecasts. The euro closed the week at 1.1155 after breaking the 1.12 this week. The euro is now at its highest level in over a year, and this has to be more bad news for Mario Draghi. “Having succeeded in bringing the euro down sharply last year, the ECB has recently fallen behind in the race among global policymakers to weaken their currencies in order to boost growth and stave off deflation,” Jonathan Loyne, an economist at Capital Economics Ltd wrote in a note to clients on Thursday. “While the ECB has always insisted that the currency is not a policy tool, it is clear that it needs to weaken the euro again significantly in order to meet its inflation target.

Draghi has been struggling to revive inflation in the region in the face of an oil slump. But while cheap crude is a boon for consumers and boosts economic activity, a stronger currency might put pressure on exporters and take the wind out of the region’s weak recovery.

ECB officials are concerned that the most recent slide in the price of crude oil may prompt a second wave of low inflation, dragging down wage growth and expectations of future price rises.

But while Mr Draghi said officials “cannot be relaxed” about such second-round effects, the Bundesbank and Mr Weidmann have claimed there is no evidence to support the argument that the fall in the price of oil acts as a disinflationary pressure on the broader economy.

Mr Draghi took aim at critics who claim central banks should accept permanently low inflation — because of ageing populations and technological change.

“There are forces in the global economy today that are conspiring to hold inflation down. Those forces might cause inflation to return more slowly to our objective,” he said. “But there is no reason why they should lead to a permanently lower inflation rate.”

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.

Major Economic Events for the week:


Date	Currency		Forecast
Feb 7	JPY	Current Account	1.59T
Feb 8	CAD	Building Permits m/m
	USD	Mortgage Delinquencies
Feb 9	AUD	NAB Business Confidence
	GBP	Trade Balance	-10.4B
	USD	JOLTS Job Openings	5.54M
	AUD	Westpac Consumer Sentiment
Feb 10	GBP	Manufacturing Production m/m	0.0%
Feb 11	CAD	NHPI m/m	0.3%
	USD	Unemployment Claims	287K
Feb 12	AUD	Home Loans m/m	2.9%
	EUR	German Prelim GDP q/q	0.3%
	EUR	Flash GDP q/q	0.3%
	USD	Core Retail Sales m/m	0.0%
	USD	Retail Sales m/m	0.1%
	USD	Import Prices m/m	-1.4%
	USD	UoM Consumer Sentiment	92.6
Feb 13