EUR/USD Fundamental Analysis May 8, 2014 Forecast

Analysis and Recommendations:

The EUR/USD gave back most of its earlier gains to trade at 1.3932 ahead of the European Central Bank meeting scheduled tomorrow.  A dismal German factory orders release also weighed on the currency.

Traders are closely monitoring Janet Yellen’s testimony to see what the head of the US Fed will have to say and if she will deviate from prepared texts.

The ECB to now expected to keep a wait-and-see attitude as the inflation outlook has not changed materially and as the recovery has gained some momentum. There seems to be no compelling reason to take additional liquidity enhancing measures either a tensions on money market are transitory and technical in nature. Draghi to sound dovish and keep all option open, also due to ongoing strength euro

In April, the ECB kept its policy, as expected, unchanged. ECB president Mario Draghi struck a tone though that was subtly more dovish than in March and was correctly, we think, considered as a re‐opening of the door to a possible further policy easing. His comments contained substantial “verbal” easing. He stressed the risks of a “too prolonged period of low inflation” and spoke about the “rich and ample” discussion the Governing Council had undertaken on the possible need for policy easing. He suggested that the ECB was not out of room on rate cuts, but highlighted the potential to use unconventional tools, including the commitment to use QE, on which the ECB was now “unanimous”. Finally, he told the FX rate is increasingly important and sounded concerned about the strong euro. Mr Draghi put markets on alert for a further policy easing. This means there is some possibility of action as early as this week. On balance, don’t expect the ECB to take major actionwhen it meets on Thursday

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 up to the data analysis and information in our weekly reports.

Economic Data May 7, 2014 actual v. forecast

 

Upcoming Economic Events that affect the EUR, GBP and USD

Government Bond Auction

Date Time Country 

May 08 00:30 Japan

May 08 08:30 Spain

May 08 09:00 Ireland

May 08 10:00 Norway

May 08 15:30 Italy

May 08 17:00 US

May 08 09:03 Sweden