EUR/USD Weekly Fundamental Analysis – April 4- 8, 2016 -Forecast

The EUR/USD ended the week with a 2% gain at 1.1389 on better than expected data, but the climb in the euro is weighing heavily on exporters and the ECB plans. The US dollar fell most of the month on dovish FOMC outlooks.  The euro zone economy continues to face significant headwinds from the influx of refugees, heightened security challenges amid terrorist attacks, uncertainty surrounding the outcome of the UK’s EU referendum, rising political polarization, and new bank regulations. However, after economic indicators showed signs of slowing growth dynamics in recent months, the latest euro zone business surveys for March notably euro area PMIs, economic sentiment, the German Ifo and ZEW have proven somewhat better than expected. Hard data, such as industrial production and retail sales, also started the year off very strong, though there is a risk of downward payback in the months ahead given global growth uncertainty and the potential adverse impact on confidence from the devastating terrorist attacks in Brussels on March 22nd. This suggests to us that the Eurozone recovery is on track, but will remain fragile and lackluster, which combined with subdued oil prices will keep inflationary pressures in check. After introducing an array of easing measures in December, the European Central Bank (ECB) unveiled a fresh round of monetary stimulus in early March — including cutting benchmark interest rates to new record lows and increasing its asset purchase program by €20bn per month to €80bn — in an attempt to lift inflation towards the ECB’s close to, but below, 2% target. Speculators slashed bullish bets on the U.S. dollar for a fourth straight week, with net longs falling to their lowest in nearly two years, according to Reuters calculations and data from the Commodity Futures Trading Commission released on Friday. The value of the dollar’s net long position fell to $4.65 billion in the week ended March 29, from $5.91 billion the previous week. Dollar net longs came in below $10 billion for a seventh consecutive week. In March, the dollar index fell 3.7 percent, its weakest monthly performance since April last year. eurusd Major Economic Events for the week:

Cur. Event Actual Forecast Previous
Monday, April 4, 2016
China – Tomb Sweeping Day
  AUD Retail Sales (MoM) (Feb) 0.4% 0.3%
  GBP Construction PMI (Mar) 54.0 54.2
Tuesday, April 5, 2016
  AUD Interest Rate Decision (Apr) 2.00% 2.00%
  GBP Construction PMI (Mar) 54.2
  GBP Services PMI (Mar) 54.0 52.7
  USD ISM Non-Manufacturing PMI (Mar) 54.0 53.4
Wednesday, April 6, 2016
  GBP Services PMI (Mar) 52.7
  CAD Ivey PMI (Mar) 55.0 53.4
  USD Crude Oil Inventories 2.299M
Friday, April 8, 2016
  GBP Manufacturing Production (MoM) (Feb) -0.2% 0.7%
  CAD Employment Change (Mar) 15.0K -2.3K

 

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