EUR/USD Monthly Fundamental Forecast October 2013

Outlook and Recommendation

The EUR/USD closed near recent highs at 1.3542 after the FOMC decided not to begin tapering and mixed data from the US. Mr Draghi tried to support the euro but data was not as kind. Politics in Italy are in an uproar with a non-confidence vote scheduled this week. What more could you expect. A US government shutdown, the Fed’s decision to delay tapering, a looming debt ceiling debate, a temporary easing in Syria-centered geopolitical risk, an improvement in the global growth outlook, an appreciating euro and a stable Chinese renminbi are the themes driving investor sentiment into the final quarter of the year.

Traders can expect the USD to strengthen into year-end, with almost all the primary currencies falling victim to the shifting Fed stance while at the same time domestic central banks begin to tire of strong currencies. In addition, an improving US growth outlook helps to support the USD, though we recognize the multi-faceted risk of US political gridlock.

Entering October the EUR is near its 2013 highs and is the best performing major currency year-to-date. Supporting the EUR has been relative monetary policy – the ECB’s shrinking balance sheet juxtaposed against the Feds who is hesitant to taper; combined with improving sentiment as the euro zone exits recession. We see risk in the EUR and expect that the combination of a Fed that ultimately tapers and a lack of progress on the banking union as key risks to the EUR

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 – Fed Reserve

Date of next meeting or last meeting: Oct 30, 2013

Current Rate: 0.00-0.25%

Central Bank Name –European Central Bank

Date of next meeting or last meeting: Oct 02, 2013

Current Rate: 0.50%

Economic events for the month of October affecting EUR, CHF, GBP and USD