EUR/USD Monthly Fundamental Forecast December 2012

Outlook and Recommendation

The EUR/USD closed the month at 1.2987. A slightly better-than-anticipated third-quarter performance in the euro area core (+0.2% q/q in both Germany and France) has led to adjusted 2012 GDP growth forecast from -0.6% to -0.5% for the region as a whole. Nevertheless, even with a slight uptick in certain surveys in November (PMIs, “Ifo”), leading indicators have failed to signal a material improvement in the forthcoming period. Elevated financial volatility caused unemployment, political risk, credit differentiation, fiscal tightening, and, eventually, a timid recovery to a trend growth rate of around 1-1.5% annually.

With Greece behind markets are more positive. The focus is now the US Fiscal Cliff. Democrats and Republicans will reach a compromise but not until after weeks of political showmanship and stress. Markets are sure that the US will avoid a disaster. Other events include the FOMC meeting as traders are not exactly sure if Bernanke will offer up additional stimulus.

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 recent analysis and information in our weekly reports and we provide daily updates and outlooks.

Central Bank: FED and ECB

Central Bank Name: European Central Bank

Date of next meeting or last meeting: December 6, 2012

Current Rate: 0.75%

Economic Highlights of the coming week that affect the Euro, GBP, CHF and the USD