EUR/USD Daily Fundamental Analysis for August 12, 2011

The EUR/USD continued to trade with high volatility on Thursday with the lack of major fundamentals to alter the outlook for the debt-laden euro area that fell a victim of rumors and keeping the downside pressure on the euro.

The downside bias was still evident on the pair with the euro still weak against the dollar amid the prevailing risk aversion and uncertainty over the outlook and the debt crisis status. The market is still recovering from the French rumors and speculations that forced the French president to summon the ministers from the holiday to contain a new confidence crisis.

Pressures mounted on the French president after the cost to insure French debt hit a record and borrowing costs rallied on speculation that the top credit rating might be lost amid slowing growth and inability to meet the fiscal targets.

Rating agencies still affirm their stable outlook for the French credit rating while Sarkozy provided the ministers with a week to provide spending cuts details to ensure bringing the debt burden lower and the deficit reduction to 3.0% of the GDP.

The pressure is evident and the banking sector shares are suffering especially after the rumors also on the French bank Societe Generale is about to go under, which intensified the negative pressure in the market.

The volatility will prevail on Friday with the fragile sentiment and end of the week trading. Also on Friday the euro area industrial production for June is due at 09:00 GMT and expected to remain steady on the month with 0.1% gain and to rise 4.5% on the year following 4.0%.

The United States will end the week with a high note starting with the retail sales index for July at 12:30 GMT which are expected with 0.4% rise following 0.1% and excluding autos with 0.2% rise after remaining unchanged in June and excluding auto and gas to hold steady with 0.2% rise.

The University of Michigan Confidence for August is due at 13:55 and expected with a slight drop to 63.2 from 63.7.

The business inventories index for June will follow at 14:00 GMT and expected to slow to 0.6% from 1.0% the previous month.

Leave a Reply

Your email address will not be published. Required fields are marked *