EUR/USD Monthly Fundamental Forecast June 2015

Outlook and Recommendation

The EUR/USD ended the month on a high note just under the 1.10 big figure as traders saw better than expected data and Greek leaders were saying a deal would be done over the weekend. This did not happen and the euro plunged first thing Monday morning June 1^st.

The ECB’s monetary policy is also aimed at promoting growth and, via a weaker currency, creating inflation expectations and inflation. The ECB’s escalated bond-buying in early March also had the intended effects in terms of rising economic indicators and higher inflation expectations going forward. But in order to sustain this success, by all indications the EUR needs to depreciate further.

During the latter part of 2014 and early in 2015, the US dollar (USD) strengthened sharply against other world currencies. The driving forces were strong US macroeconomic statistics and expectations that the Federal Reserve (Fed) would introduce rate hikes during the spring or summer of 2015. Since then, the USD has weakened temporarily because of unexpectedly weak US economic data and subsequent speculation in the foreign exchange (FX) market that the Fed will delay rate hikes.

Monetary policies are having a clear impact on the world economy. The belief that the Federal Reserve (Fed) will begin raising its key interest rate during 2015 has caused the US dollar to appreciate. Combined with extreme winter weather and port labour disputes, this caused US growth to dip temporarily. In the euro zone, European Central Bank (ECB) stimulus policies have rapidly affected growth as well as inflation expectations, and the euro has fallen in value.

This spring’s weakening of the USD against the EUR is expected to be only a temporary dip in a rising dollar curve, as indicated by rising US economic growth and the Fed’s imminent key rate hikes.

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.

Upcoming Economic Events that you should be monitoring: