EUR/USD Rallies, Gas and Drought Remain a Worry


Euro Key Points:

  • Euro Enjoyed a Stellar Week Against the USD.
  • Markets Lowered Expectation Around Fed Rate Hikes.
  • Gas and Drought Concerns Remain an Issue Moving Forward.

How to Combine Fundamental and Technical Analysis

EURO Week in Review

The Euro loved a stellar week of performance in opposition to the US Dollar as EURUSD rallied from 1.01700 to publish a weekly excessive of 1.03699 earlier than pulling again to trade sub-1.03.The rally got here courtesy of a weaker buck on the again of softer US CPI numbers that noticed buyers regulate price hike expectations down from 75 to 50 foundation factors for the Fed’s September assembly. Market sentiment was quickly tempered although, asFederal Reserve members have been fast to emphasize that value strain stays intense, necessitating the necessity for additional price hikes. Minneapolis Fed President Neel Kashkari stated he needs the Fed’s benchmark rate of interest at 3.9% by the tip of this yr and at 4.4% by the tip of 2023. Chicago counterpart Charles Evans acknowledged that the Fed could be rising charges for the remainder of this yr and into 2023 whereasFed Member Mary Daly yesterday confirmed that she shouldn’t be ruling out 75 foundation factors in September both.

Europe in the meantime continues to really feel the consequences of the heatwave throughout the continent as its rivers proceed to evaporate. The Rhine River, a pillar of the German, Dutch and Swiss economies for hundreds of years is ready to change into nearly impassable at a key waypoint later this week, stymieing huge flows of diesel and coal. The Rhine, whose nautical bottleneck at Kaub is predicted to dip beneath the mark of 40 centimeters early Friday and maintain falling over the weekend. While that is nonetheless larger than the report low of 27 centimeters seen in October 2018, many giant ships might battle to securely cross the river at that spot including additional worries to an already reeling Eurozone. Even with a shock within the Eurozone industrial manufacturing numbers, there may be not a lot cause for optimism within the weeks and months forward.

Eurozone Economic Calendar for the Week Ahead

Next week the Eurozone financial calendar is busy. Over the week, there are no fewer than 5 ‘high’ rated information launchs, whilst we even have eight ‘medium’ rated information releases. Every week that guarantees a lot when it comes to volatility.

Here are the excessive ‘rated’ occasions for the week forward on the Eurozone financial calendar:

  • On Tuesday, August 16,we’ve the ZEW Economic Sentiment index quantity due at 11h00 GMT.
  • On Wednesday, August 17, the preliminary GDP Growth Rate QoQ 2nd (Q2) is due at 11h00 GMT.
  • On Thursday, August 18, the ultimate Core Inflation Rate numbers are due at 11h00 GMT.

For all market-moving financial releases and occasions, see the DailyFX Calendar

EURUSD D Chart, August 12, 2022

Source: Buying and sellingView, Prepared by Zain Vawda

EURUSD Outlook and Final Thoughts

For FX markets, 2022 has been the yr of watching phrases of trade developments (the value of exports over imports). These have moved very negatively for the eurozone this yr and delivered a damaging earnings shock. This week’s transfer in fuel costs has despatched eurozone phrases of trade in the direction of the worst ranges of the yr. On the US entrance, there may be a lot of knowledge to go between now and the Fed’s September assembly together with the annual Fed Jackson Hole symposium on the finish of this month. In phrases of imminent information, the highlights for this week forward can be industrial manufacturing and retail gross sales, each of which ought to level to a rebound in third-quarter financial exercise which ought to see the greenback obtain a additional increase.

This week’s rally larger for EURUSD doesn’t persuade and I stay bullish on the greenback for now and see value ranging between the 1.0180 and the 1.0350-1.0400 vary within the short-term. DXY ought to be capable to edge a little larger as we head into the week with a sustained break above 105.50 going a lengthy method to stabilizing it after the heavy losses suffered on Wednesday’s US CPI launch.

– Written by Zain Vawda for

Contact and comply with Zain on Twitter: @zvawda

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