EURUSD Fundamentals

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The US dollar rose, pushing the euro to its lowest level since July 30, as the economic data’s from US reduced expectations that the Federal Reserve may ease monetary policy further. The euro is currently trading at 1.2277

The ICE dollar index, which measures the greenback against a basket of six major currencies, rose to 82.649, from 82.540 in late North American trading on Tuesday.

The euro dropped on speculation that the Swiss National Bank sold the currency amid an increase in its foreign exchange holdings to a record last month.

The euro-zone economy contracted 0.2% in the second quarter, and was only saved from worse by resilient growth of 0.3% in Germany. But countries accounting for 60% of euro-area GDP are stagnant or contracting & the outlook remains bleak.

Greek Prime Minister Antonis Samaras will next week have his first meetings with euro zone leaders since taking office, striving to assure them he will honor a pledge for more austerity and gauging whether they could grant him more time to pull it off.

EU CPI is expected to have fallen in July, with the consensus of forecasters anticipating a -0.5% m/m release.

US unemployment claims for the week ending August 11 will be released later today, and analysts expect that this report deserves a fair amount of attention. Unemployment claims were fairly low during July relative to June (average level during June: 386k, average level during July: 366k), however seasonal factors that accounted for periodic layoffs for automotive plant retooling that didn’t happen this year were widely thought to have distorted the numbers. The August data should be free of these issues and therefore provide a better statistical result of developments in the labor market – and if the pace of firing has indeed fallen off. Initial jobless claims for the week ending August 3 were 361k.

The other important US release that will grab attention is the July housing starts number. The forecast is 756k. As the amount of building permits issued in the US has steadily climbed higher this year, traders are expecting if not a flood at least a wave of new starts at some point during the back half of the summer or early fall. A poll of economists reflects this, with forecasts staggered from a high of 800k to a low of 730k. Traders will also see the Philly Fed index for August.

These two US reports will have a lot of weight on the US. The euro is expected to stand pat today, except for unexpected news flow, so not much will happen until these releases.

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About: FX Empire Analyst - Barry Norman

Barry produces a private Daily Market Review newsletter that is distributed around the globe to over 25,000 subscribers and recently published a book on Options Trading that is available from amazon.com

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