Sunday, October 6, 2013

EUR/USD Forecast (October 7-11)

EUR/USD reached a new 8 month high on the back of the US government shutdown, but soppted at resistance. Draghi’s speeches, Industrial data and the IMF meeting are the highlights of this week.

The ECB left all rates unchanged postponing new policy moves until the fragile euro zone recovery strengthens. The ECB became concerned with rising market interest rates over the summer, and pledged to keep the benchmark rates at a minimum low for an extended period. And while the central bank remains ready to act with new LTROs, falling inflation is currently not a worry. Draghi’s content message add fuel to the EUR/USD fire, that was lit by the US government shutdown – an unresolved theme dominating the news.

1. Sentix Investor Confidence: Monday, 8:30. Euro zone sentiment improved for the first time in more than two years in September a vote of confidence in the Eurozone economy, reaching 6.5 points after minus 4.9 in August signaling the end of recession. The reading beat market forecast for minus 4. A boost in exports and increased spending pulled the euro zone out of recession in the second quarter of 2013. A further boost to 10.9 is expected now.

2. German Trade Balance: Tuesday, 6:00. Germany’s trade surplus narrowed in July to 14.5 billion following 15.8 billion in the previous month as exports weakened. In unadjusted terms, trade surplus decreased slightly to 16.1 billion euros from 16.9 billion euros, amid a rise in imports. Exports to the European Union as a whole edged up by 0.8 percent and exports to the rest of the world were up by 3.6 percent, the statisticians said. A rise to 15.1 billion is expected.

3. German Factory Orders: Tuesday, 10:00. German factory orders declined in July, down 2.7% following a 5.0% boost in demand by the Paris Air Show a month earlier. Economists expected a small drop of 0.7%. On a yearly base, orders advanced 2%, when adjusted for the number of working days. German economy expanded 0.7% pulling the 17-nation euro area out of its longest-ever recession. Manufacturing expanded and business confidence increased to a 16-month high in August, indicating a solid pick-up in German economy. A pick-up of 1.2% is expected now.

4. German Industrial Production: Wednesday, 10:00. German manufacturing output fell 1.7% in July, following a 2.0% gain in the previous month. However a two-month average suggested that industry in Europe’s largest economy is on the path to recovery. The current drop in production could be related to the previous month, where output boosted 2.0% driven by a high number of public holidays. The general trend indicates growth in manufacturing and significantly stronger in construction. A rise of 1.1% is expected.

5. French Industrial Production: Thursday, 6:45. French industrial output fell unexpectedly by 0.6% in July after a 7.4% plunge in the previous month, due to lower car production and mineral refining, casting shadow over French recovery in the beginning of the third quarter. The data suggests the economy is still weak after pulling out of recession in the second quarter. A rise of 0.7% is forecasted.

6. ECB Monthly Bulletin: Thursday, 8:00. The ECB monthly bulleting released in September revealed that the Euro area has recovered during the Q2 of 2013 and is expected to continue its recovery in the remaining year however, the Euro Zone should continue the reforms, in order to strengthen recovery. The Euro area real GDP, edged up 0.3% in the second quarter of 2013. ECB projected an annual GDP decline of 0.4% in 2013 and an expansion of 1.0% in 2014. ECB interest rates will remain at present or lower levels for an extended period of time.

7. Mario Draghi speaks: Thursday, 13:00. ECB President Mario Draghi is scheduled to speak in New York where he is likely to discuss the Eurozone recovery and his plans for further easing measures to ensure a speedy recovery. Market volatility is expected. He managed to deflect sensitive political questions in the last statement. What will he say now?

*All times are GMT
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