By FXEmpire.com
Outlook and Recommendation
The EUR/USD closed the month at a recent low, trading at 1.2363, risk aversion continues to drive the markets at the end of the month and as shown on the chart below, the euro is trading at the bottom of the range. Dropping almost 9 cents this month
The euro (EUR) lost almost 7% in the month of May and remains weak into the early part of June. According to the CFTC, traders hold a record short EUR position of US$32 billion, leaving an uneven balance and opening the risk of short covering. In early June rumors of a ‘grand’ European plan provided some stability, the question from here is whether politicians will have the ability to sell such a plan. EUR should avoid a collapse, supported by value in Germany, the looming US fiscal cliff and repatriation flows into EUR; however the currency is expected to trend lower, closing the year at 1.23.
The euro crisis has again intensified, with several near-term uncertainties clouding the outlook for the currency union. The next month will be marked by significant event risk, with a key European Central Bank (ECB) meeting on June 6th, French and Greek elections on the 10th and 17th, respectively, and an EU summit at the end of the month (28th-29th). Financial markets have relapsed, evidenced by rising sovereign bond yields and widening credit spreads (Spanish 10-year yield at 6.5% in late May, approaching late-November highs), as well as falling equity and commodity prices and massive safe haven flows weighing on the euro. This volatility will likely persist in the months ahead with many unresolved issues pertaining to the debt crisis straining investor confidence, including the possibility of a Greek exit from the union, rising imbalances and their varied implications for different euro zone members, rising social and political tensions in the context of the growth versus austerity debate, and the enduring woes in the Spanish banking sector (with estimates of ultimate state recapitalization needs varying widely). Ongoing financial instability and deteriorating confidence will dampen growth, particularly in the periphery. Notwithstanding the better than-expected result registered by the euro area economy in the first quarter, we have lowered our expectations for 2012-13. We now project a contraction of 0.6% this year to be followed by growth of just 0.7% next year. Further monetary easing by the ECB is still considered likely.
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 up to the data analysis and information in our weekly reports.
Central Bank Name: European Central Bank
Date of next meeting or last meeting: Jun 06
Current Rate: 1.00 % (- 0.25) The ECB met at the time of this writing and held rates
Statement highlights of last meeting: Based on our regular economic and monetary analyses, we decided to keep the key ECB interest rates unchanged. The information that has become available since the beginning of March broadly confirms our previous assessment. Inflation rates are likely to stay above 2% in 2012, with upside risks prevailing. Over the policy-relevant horizon, we expect price developments to remain in line with price stability. Consistent with this picture, the underlying pace of monetary expansion remains subdued. Survey indicators for economic growth have broadly stabilized at low levels in the early months of 2012, and a moderate recovery in activity is expected in the course of the year. The economic outlook remains subject to downside risks.
Central Bank Name: Fed Reserve
Date of next meeting or last meeting: Jun 20
Current Rate: 0-0.25 % (- 0.75)
Statement highlights of last meeting: To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions-including low rates of resource utilization and a subdued outlook for inflation over the medium run-are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.
Highest: 1.5091 USD on Dec 03, 2009.
Average: 1.3709 USD over this period.
Lowest: 1.19 USD on Jun 07, 2010.
Economic events for the month of June affecting EUR, CHF, GBP and USD
|
Time |
Cur. |
Event |
Forecast |
Previous |
||||
|
Friday, June 01 |
||||||||
|
12:30 |
USD |
8.1% |
8.1% |
|||||
|
12:30 |
USD |
150K |
115K |
|||||
|
14:00 |
USD |
53.9 |
54.8 |
|||||
|
Wednesday, June 06 |
||||||||
|
11:45 |
EUR |
1.00% |
1.00% |
|||||
|
Thursday, June 07 |
||||||||
|
11:00 |
GBP |
0.50% |
||||||
|
Thursday, June 14 |
||||||||
|
07:30 |
CHF |
0.25% |
||||||
|
Wednesday, June 20 |
||||||||
|
08:30 |
GBP |
-13.7K |
||||||
|
Thursday, June 21 |
||||||||
|
08:30 |
GBP |
-1.1% |
||||||
|
08:30 |
GBP |
-2.3% |
||||||
June Major Economic Events
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Originally posted here
