EUR/USD Weekly Fundamental Analysis, November 16 – November 20, 2015 Forecast

Weekly Analysis and Recommendations:  The EUR/USD traded down to its lowest level since April 23, but was able to rebound to 1.0762 on the close, putting it up .0024, or 0.22% for the week.

The week started out with the EUR/USD under a bearish cloud because last Friday’s stronger-than-expected U.S. Non-Farm Payrolls report raised the probability of an early Fed rate hike to 70%. This news drove the Euro lower. However, the Euro began to pick up strength about mid-week on speculation that the European Central Bank’s planned fresh stimulus will not be as large as previous estimated. Additionally, the weaker stock market helped boost the funding element of the Euro.

The Euro was also little changed after the Euro Zone’s GDP figures misses estimates. According to preliminary estimates by Eurostat, Euro Zone’s Gross Domestic Product (GDP) grew a seasonally adjusted 0.3% in the third quarter of 2015, below the 0.4% expected by economists, and down from 0.4% in the previous quarter. The year-on-year change in GDP was 1.6%, below the expected 1.7%, but above the prior 1.5%.

The Euro was also able to overcome comments from ECB President Mario Draghi. Speaking before the European Parliament, Draghi said the outlook for core inflation “somewhat weakened,” and stated that downside risks from a global slowdown are “clearly visible”, thus adding to speculation that the ECB will expand QE in December. Some traders, however, believe that the expanded QE may not be as large as previously estimated because of the recent drop in the Euro.

This week will feature the year-over-year Final CPI, which is expected to come in at 0.0%. Year-over-year Final Core CPI is expected to show that Euro Zone inflation grew at a rate of 1.0%.

This week, investors will get the opportunity to react to the latest U.S. consumer inflation data, too. Month-to-month core inflation is expected to rise 0.2%, or 1.9% annually. This will put it just under the Fed’s benchmark target of 2.0%. However, next month, the figure may rise to 2.0% or higher because last year’s steep drop in crude oil prices will start to be filtered out of the inflation equation. 

Also on-tap on Wednesday, November 18 are the minutes of the last Fed meeting. Thursday features the ECB Monetary Policy Meeting Accounts. Hawkish minutes are likely to put some pressure on the EUR/USD because they will highlight the divergence between the monetary policies of the hawkish U.S. Federal Reserve and the dovish European Central Bank. 

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. 

Reports to Watch This Week: 

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