This morning the euro is trading in the red, as Asian markets sold off pushing the euro to trade at 1.3322 down by 20 pips. At the end of the week, the euro touched above 1.33 as the dollar fell to its lowest level of 80. The euro settled at 1.3347 on a weekly basis and appreciated 0.98%. The euro-zone’s June Sentix investor confidence index improved from -15.6 to -11.6 backed by improving economic growth, supporting the shared currency. However, the German consumer price index and industrial production increased at a slower pace. The euro-zone’s consumer price index increased more than the before on the back of an increase in the demand for goods which supported the euro against the dollar. However, European equities remained on a negative note last week, backed by the World Bank lowering the global growth forecast for 2013. Later today markets are anticipation of an improving euro-zone trade balance, which should cap the euro’s losses. In the North American session, the US will release its Empire manufacturing and NAHB housing market index data which may have a mixed impact on the dollar.
Although regardless of eco or fundamental data, the marquee event and the main market mover will be the anticipation of the FOMC decision. The key focus is on what Fed Chairman Ben Bernanke will say following the U.S. central bank’s June 18-19 meeting as expectations that the Fed will soon start tapering markets off its stimulus roiled global equities markets. The Fed will most likely hold rates and its current policy; markets will be looking for any indication of a plan to begin tapering, which will mean that Mr. Bernanke’s conference will be the highlight. The media conference will give Chair Bernanke an opportunity to better communicate the timing of how and when the Fed will begin stepping out of QE. It is encouraging that nonfarm payrolls have averaged just below 200k over the last 6‐months; however the month‐to‐month variance is signiﬁcant. This combined with inﬂation is likely to see a reiteration that the Fed will ﬂirt with stepping out of QE in the late fall; but leave the door open to stepping back in should the data weaken and highlight that a decrease in monthly buying still leaves policy as loose. The forecasts, which could include an improved outlook for employment, potentially oﬀset by a lower forecast for inﬂation will be a major focus.
Traders can expect the euro to continue its positive trend against the dollar. European leaders will meet to discuss the record high unemployment and find the way to overcome this problem. This may create optimism in the market and may support the euro. Europe’s trade balance is expected to improve, backed by the slowdown in imports, comparatively higher than export trades. The euro-zone economic sentiment and Germany’s consumer confidence and current situation are likely to improve along with the PMI, backed by the improvement in investor’s sentiments.