EUR/USD Fundamental Analysis – Forecast for the week of September 19, 2016

The EUR/USD ended the week with a loss of just under 1% as the greenback continued to rally. The dollar is up as we count down days to the FOMC meeting. The euro is also troubled by the DOJ settlement offer to Deutsche Bank for 14 billion US dollar. The euro will open the new week at 1.1155 and will remain neutral this week ahead of the big events.

Weaker stocks are weighing on the EUR somewhat but the market is respecting recent ranges. Despite a run of mostly better than expected data this week, the GBP is under-performing on the session and heading for a soft close on the week. While data suggest that the immediate aftermath of the Brexit decision has not been too painful for the UK economy, the BoE’s cautious outlook, leaving the door wide open for more policy easing, has perhaps prompted investors to take a long view of the process.

The market has eased modestly from the mid 1.12 area through European trading as local bank stocks wilted. The euro seems more immune to the challenges of the local banking sector at the moment. We think spot still looks “rich” relative to fair value, based on Eurozone/US spreads and equity returns; major model suggests equilibrium based on these variables is a little under 1.06 currently

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This Week’s Economic Events That You Should Be Monitoring:

Date Country Name Volatility Previous
9/20/2016 AUD RBA Meeting’s Minutes 3
9/20/2016 CAD BoC Governor Poloz 3
9/21/2016 AUD Mid-Year Economic Outlook 3
9/21/2016 JPY BoJ Interest Rate Decision 3 -0.1
9/21/2016 JPY BoJ Monetary Policy Statement 3
9/21/2016 JPY BoJ Press Conference 3
9/21/2016 USD FOMC Economic Projections 3
9/21/2016 USD Fed’s Monetary Policy Statement 3
9/21/2016 USD Fed Interest Rate Decision 3 0.5
9/21/2016 USD FOMC Press conference 3
9/21/2016 NZD RBNZ Interest Rate Decision 3 2
9/22/2016 EUR ECB President Draghi’s Speech 3
9/23/2016 AUD RBA’s Governor Lowe Speech 3

Government Bond Auctions

Date Time       Country           Auction

Sep 19 11:00 Belgium Eur 2.8-3.5bn 4.5% Mar 2026,

Sep 20 11:30 UK Gbp 2.5bn 1.5% Jul 2047 Gilt

Sep 21 10:30 Denmark Holds bond auction

Sep 21 11:03 Sweden Sek 2bn 4.25% Feb 2019 & Sek 1.5bn 1.5% Nov 2023 bonds

Sep 21 11:30 Germany Eur 4bn 0% Oct 2021 Bobl

Sep 22 17:20 Italy Announces details of bond auction

Sep 22 19:00 US Usd 11bn 0.125% Jul 2026 TIP

Sep 26 11:30 Germany Eur 1.5bn Sep 2017 Bubill

Sep 26 13:00 Norway Details of bond auction on Sep 28

Sep 27 11:00 Netherlands Eur 0.75-1.25bn 4% Jan 2037 DSL

Sep 27 11:10 Italy Holds zero coupon/BTP€i auction

Sep 28 11:05 Norway Holds bond auction

Sep 28 11:30 Germany Eur 4bn Sep 2018 Schatz

Sep 29 11:03 Sweden Holds I/L bond auction