EUR/USD Weekly Fundamental Analysis March 4 – March 8, 2013 Forecast

EUR/USD Weekly Fundamental Analysis March 4 – March 8, 2013 Forecast

The EUR/USD hit a low of 1.2967 to close at 1.3018 after eurozone PMI’s printed weak as did the zone unemployment numbers. The US dollar gained momentum all week, starting with testimony by Chair Ben Bernanke followed by strong eco data. The “sequestered” budget cuts came into effect like Y2K with lots of warning and little reaction. President Obama on Friday signed a bill making the cuts official as lawmakers could not reach or were unwilling to reach a deal.

The World Bank cut its projection for economic growth in the U.S by 0.5 percent to 1.9 percent. It also reduced its forecast for Japan, to 0.8 percent from 1.5 percent, and predicted a second year of contraction in the euro region. They also lowered estimates for emerging markets led by Brazil, India and Mexico.  China’s growth, the biggest copper consumer, was cut to 8.4 percent from 8.6 percent. Lower growth forecasts are likely to hurt demand for industrial metals and can push prices down.

The planned spending cuts known as “sequestration,” which would total $1.2 trillion over a decade, are expected to trigger from March 1. The first round of cuts would total about $85 billion over seven months. The spending cuts would be spread across defense as well as non-defense sectors. This would lead to lower public expenditure and layoffs which will have negative effects on the economy and can push the economy into recession. However, if the Congress avoids these deep spending cuts, it could save the economy from slipping into recession.

The euro zone GDP contracted by 0.6% for the previous quarter. Germany, Europe’s largest economy shrank by 0.5 percent after a 0.2 percent expansion in the third quarter, with French economic output declining by 0.3 percent. The recession is expected to continue in the first half of 2013 after which economic activity would recover gradually. This is likely to keep metals demand subdued.

Will US markets move to heightened alarm in anticipation of a government shutdown and rising fiscal policy risks now that it appears evident that — at least temporarily — the $85 billion in sequester cuts are being triggered?

Treasuries gently rallied, but not by much and the room for rallying off higher yields was much greater than today. Equities and equity volatility shook it off. Today’s sequester cuts will shave around a half percentage point off of US GDP between now and September if they are not replaced with an alternative agreement at some point. Developments on Friday were not constructive in the sense that the GOP is sticking to its hard line on no revenue increases while the White House prefers a mixture of tax increases and spending cuts.

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 of February 25 – March 1 actual v. forecast for Euro, GPB, the Franc, and USD

 Historical: From 2010 to Present

Highest: 1.4940 USD on May 04, 2011.

Average: 1.3434 USD over this period.

Lowest: 1.1877 USD on Jun 07, 2010.

Economic Highlights of the coming week that affect the Euro, GBP, CHF and the USD

Government Bond Auction

Date Time Country 

Mar 05 10:10 Norway

Mar 05 10:15 Austria

Mar 05 10:30 Belgium

Mar 05 10:30 UK

Mar 05 15:30 UK

Mar 06 10:10 Sweden

Mar 06 10:30 Germany

Mar 07 09:30 Spain

Mar 07 09:50 France

Mar 07 15:30 Sweden

Mar 07 16:30 Italy

Mar 07 16:00 US

Mar 08 11:30 Belgium

Mar 08 16:30 Italy