Forex market outlook for the week ahead:
The
4 main pillars of of our study within the setting of this week's
calendar of economic reporting are as follows - The USD, by virtue of
being the 'international' currency of global choice, the 'Euro' being
the second most trade-able currency, crude oil as a barometer of
economic activity and gold as an economic store of value.
Traders were negative all this week pushing the EUR/ USD from 1.10 to 1.08. With great reluctance Germany has agreed to the bail out plan of 86 billion dollars over a 3 year period. But that doesn't change anything; Greece has to repay to the IMF €1.6 billion and owes the ECB €3.6 billion. with an economy tottering on borders of chaos how are these new austerity measures going to help the Greek economy grow and repay its debts? This question burning in traders minds translates into possible further ECB refinancing packages or quite simply put " kicking the can down the road!" for the sake of an expensive political unity. Further lending is not going to sit well with the ECB who will need to rob Petr to pay Paul so to speak. The ECB is going to have to increase its bond repurchase program at some point to satisfy the political will to see the European Union through its worst financial crisis. This will mean a devaluation of the Euro currency. there is nothing now to stop the EUR/ USD from falling to 1.05 no matter how stellar Germany and France will become; their choice of carrying the big fat debt baby is going to bog down the European bond markets with lower yields. Cheap credit will become a big hurrah for the European stock markets and will greatly enhance economic growth in those countries with low debt. It will also boost the Chinese equities markets but ultimately a cheaper EUR/ USD is going to hurt US equities. Pound for pound a strong Dollar is going to crimp on US exports in key areas of the economy and boost European exports. Add to this headline inflation in the US is now 1.8% compared to MAY 1.7% and creeping closer and closer to the Fed alert target of 2%
Looking forward we can see EUR/ USD slipping further by friday to 1.07 with strong housing data and USDX hitting the 98 mark.
With the Iran deal we have a big problem in the crude oil market. Crude oil prices WTI has already fallen a massive 20% in the last 4 weeks form the $62 mark to $49. Iran exports coming online is going to put massive pressure on the US crude oil production industry already reeling from the Saudi price drop. In the weeks to come unless the Chinese markets and pick up steam we may well see crude oil falling to a new channel of $45 - $55.
Strong Dollar; weak gold. Bullion is already trading around the 1135 and should consolidate for the moment.
Traders were negative all this week pushing the EUR/ USD from 1.10 to 1.08. With great reluctance Germany has agreed to the bail out plan of 86 billion dollars over a 3 year period. But that doesn't change anything; Greece has to repay to the IMF €1.6 billion and owes the ECB €3.6 billion. with an economy tottering on borders of chaos how are these new austerity measures going to help the Greek economy grow and repay its debts? This question burning in traders minds translates into possible further ECB refinancing packages or quite simply put " kicking the can down the road!" for the sake of an expensive political unity. Further lending is not going to sit well with the ECB who will need to rob Petr to pay Paul so to speak. The ECB is going to have to increase its bond repurchase program at some point to satisfy the political will to see the European Union through its worst financial crisis. This will mean a devaluation of the Euro currency. there is nothing now to stop the EUR/ USD from falling to 1.05 no matter how stellar Germany and France will become; their choice of carrying the big fat debt baby is going to bog down the European bond markets with lower yields. Cheap credit will become a big hurrah for the European stock markets and will greatly enhance economic growth in those countries with low debt. It will also boost the Chinese equities markets but ultimately a cheaper EUR/ USD is going to hurt US equities. Pound for pound a strong Dollar is going to crimp on US exports in key areas of the economy and boost European exports. Add to this headline inflation in the US is now 1.8% compared to MAY 1.7% and creeping closer and closer to the Fed alert target of 2%
Looking forward we can see EUR/ USD slipping further by friday to 1.07 with strong housing data and USDX hitting the 98 mark.
With the Iran deal we have a big problem in the crude oil market. Crude oil prices WTI has already fallen a massive 20% in the last 4 weeks form the $62 mark to $49. Iran exports coming online is going to put massive pressure on the US crude oil production industry already reeling from the Saudi price drop. In the weeks to come unless the Chinese markets and pick up steam we may well see crude oil falling to a new channel of $45 - $55.
Strong Dollar; weak gold. Bullion is already trading around the 1135 and should consolidate for the moment.
This coming week important select data reports to watch out for are the following:
Wed 22 -
GBP Bank of England Minutes
USD Existing Home Sales (JUN) Forecast 5.40m Previous 5.35m
Thu 23 -
GBP Retail sales Ex Auto Fuel (YoY) (JUN) Forecast 5.10% Previous 4.40%
CDN Retail sales Ex Auto Fuel (YoY) (MAY) Previous - 0.006%
Fri 24 -
USD New Home Sales (JUN) Forecast 540k Previous 546k
Pieter Bergli - DeLoren Trust Holdings
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