EUR/USD Fundamental Forecast – September 16, 2016

The EUR/USD remains range bound with a small decline today to trade at 1.1240 after CPI and PPI data met expectations but remain way too low to help the Eurozone economy. Traders cut the chances of a Fed rate hike at the central bank’s Sept 20-21 meeting to just 15 per cent from 21 per cent, according to the CME Group’s FedWatch tool. Goldman Sachs also further cut its view on the likelihood of a rate hike next week, dropping it to just 25 per cent from 40 per cent after the final round of Fed speakers on Monday.

July’s Eurozone Industrial Production figures proved disappointing on Wednesday, with output shown to have contracted further on both the year and the month. This suggested that the domestic economy remains in a less-than-robust state, raising concerns over the outlook of the industrial sector. The Euro (EUR) has also come under pressure thanks to renewed anxiety over Greece, with its next tranche of bailout funds possibly in jeopardy due to the slow pace of creditor-mandated reforms. Even so, with the European Central Bank (ECB) looking unlikely to ease policy further in the near future the single currency has remained generally biased to the upside.

Inflation in the Eurozone was confirmed at 0.2% in August, unchanged from July, according to data from Eurostat. Food, alcohol and tobacco prices rose 1.3%, down slightly from a 1.4% increase in July. Meanwhile, energy prices fell 5.6%, which was less than the 6.7% drop seen in July. For the European Union, inflation came in at 0.3%, up from 0.2% the month before. The largest upward impacts to euro area annual inflation came from restaurants & cafés, fruit and vegetables, while fuels for transport, heating oil and gas had the biggest downward impacts, the Eurostat said.

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 September 16, 2016

Government Bond Auctions

Date Time Country Auction

Sep 15 10:30 Spain 0.75% Jul 2021 Bono, 1.3% Oct 2026 bond & 1.95% Jul 2030

Sep 15 10:50 France Eur 5-6bn 0% Feb 2019 & May 2021 OATs

Sep 15 11:03 Sweden Sek 0.5bn 0.125% Jun 2019 I/L & Sek 0.5bn 4% Dec 2020 I/L

Sep 15 11:50 France Eur 0.75-1.25bn 0.1% Mar 2021 & Mar 2025 OAT

Sep 19 11:00 Belgium Holds OLO auction

Sep 20 11:30 UK Jul 2047 Gilt

Sep 21 10:30 Denmark Holds bond auction

Sep 21 11:03 Sweden Holds bond auction

Sep 21 11:30 Germany Eur 4bn 0% Oct 2021 Bobl

Sep 22 17:20 Italy Announces details of bond auction