EUR/USD Fundamental Analysis – November 10, 2015 – Forecast

Analysis and Recommendations:

The EUR/USD is up 46 points at 1.0786 as the pair adjusts from Friday’s dollar rally after the Nonfarm payroll report turned traders views towards at December rate increase. Goldman Sachs is reiterating its call for euro-dollar parity by year-end, unfazed by the fact that it stands practically alone in seeing such steep appreciation by the greenback.

The US currency will need to surge more than 7 per cent from $1.0769 per euro as of 7 a.m. in London to reach parity, a move that isn’t predicted in any of more than 60 bank forecasts tracked by Bloomberg.

Even after retreating 0.2 per cent on Monday amid gains by higher-yielding assets, the greenback has climbed 2.3 per cent since Oct. 30 and more than 12 per cent this year. The dollar surged on Friday after the strongest payrolls report this year boosted the odds that the Federal Reserve will lift its benchmark rate in December to 68 per cent, up from 35 per cent on Oct. 27, the day before the central bank concluded its last policy meeting. There’s plenty of scope for the US currency to benefit as the Fed “normalizes” policy and the European Central Bank adds stimulus to spur inflation, Goldman analysts, led by New York-based chief currency strategist Robin Brooks, wrote in a report dated Nov. 8.

Given the substantial rally seen in the US dollar following the release of the Fed’s October monetary policy statement, something that indicated the FOMC are moving closer to a rate hike, the trio have little doubt the US dollar will benefit from higher interest rates.

“If markets are willing to reward a mere change in wording in this manner, we think there is little doubt that lift-off will be Dollar-positive. In short, we see plenty of scope for Dollar strength as the Fed normalizes monetary policy, in part because the amount of stimulus in recent years has been so large and unusual,” they note.

They also suggest that the notion ECB monetary policy is a byproduct of the Fed is incorrect, pointing to recent policy divergence from both central banks as a result of changing domestic economic circumstances.

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.

Today’s economic releases:

 

Upcoming Economic Events that you should be monitoring:

Tuesday, November10, 2015

Government Bond Auctions

Date Time Country

Nov 10 10:30 UK 0.125% 2058 I/L Gilt auction

Nov 10 N/A Holland Eur 2.0-3.0bn 0% Apr 2018 DSL

Nov 10 N/A US Holds 10-year note auction

Nov 11 10:03 Sweden Holds bond auction

Nov 11 11:15 Norway Holds bond auction

Nov 11 10:30 Germany Eur 3bn 0.25% Oct 2020 Bobl

Nov 12 10:10 Italy Auctions BTPs/CCTeus

Nov 12 10:30 UK 4.25% 2039 Gilt auction

Nov 12 N/A US Holds 30-year bond auction