EUR/USD Fundamental Analysis October 28, 2014 Forecast

Analysis and Recommendations:

The EUR/USD gained 15 points in trading on Monday as investors breathed a sigh of relief now that the Bank Stress Test is behind the markets with no surprises. The ECB announced yesterday that 25 banks faced a capital shortfall of €25 billion in total, but 12 of these banks already covered their shortages during 2014. Italy was the big underperformer with nine banks failing the stress tests and four banks still in need of additional capital.

Traders will get some direction today in to just how aggressive Mario Draghi is willing to be. This afternoon, the European Central Bank will reveal how much it spent on covered bonds last week after returning to that market for a third time as part of a renewed bid to stave off deflation. The central bank bought at least 800 million euros ($1 billion) of assets from Portugal to Germany in the three days since the program began on Oct. 20, traders said last week. Formal details will help them divine how quickly the ECB president can reach his target of expanding the institution’s balance sheet by as much as 1 trillion euros.

After the stronger than expected EMU PMI’s, it will be interesting to see whether the German IFO business climate indicator shows a similar picture. The consensus is looking for a marginal worsening of the IFO indicator from 104.7 to 104.5 with both the expectations sub-indicator and the current assessment worsening slightly. After the significant improvement in the German manufacturing PMI last week, we believe that the risks for the IFO are on the upside too. This would be a welcome sign that the German economy is in better shape than feared recently. Also interesting will be the EMU M3 money supply and credit growth data. Growth in M3 is forecast to have accelerated further in September, from 2.0% Y/Y to 2.2% Y/Y.

After the significant improvement in the German manufacturing PMI last week, we believe that the risks for the IFO are on the upside too. This would be a welcome sign that the German economy is in better shape than feared recently.

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 actual vs. forecast:

 

Upcoming Economic Events that you should be monitoring:

Government Bond Auction

Date Time Country Auction

Oct 28 12:10 Italy BOT auction

Oct 28 19:00 US 2Y Note auction

Oct 29 12:03 Sweden Bond auction

Oct 29 12:30 Germany Eur 4.0bn Aug 2024 Bund auction

Oct 29 17:30 US 2Y FRN auction

Oct 29 19:00 US 5Y Note auction

Oct 30 12:10 Italy BTP/CCTeu auctions

Oct 30 19:00 US 7Y Note auction