Fundamental Weekly Forecasts for US Dollar, AUDUSD, GBPUSD and GOLD

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Sergey Golubev, 2015.07.24 16:27

Forex Weekly Outlook July 27-31 (based on forexcrunch article)

German Business Climate, US Durable Goods Orders, GDP data from the UK, the US and Canada, US Rate decision, FOMC statement and US Unemployment Claims. These are this week’s major market movers. Here is an outlook on these events.

Last week US jobless claims continued to surprise with a 26,000 fall in the number of new claims, reaching a seasonally adjusted 255,000. This release hit the lowest level since November 1973, indicating the US labor market continues to expand with growing number of jobs and improved employment conditions. Economists expected claims to reach 279,000 this week. The positive trend in the job market together with promising housing data suggest the Fed will raise rates very soon.

1. Eurozone German Ifo Business Climate: Monday, 8:00. German business climate index fell to 107.4 points in June from 108.5 points the prior month. The bigger than expected drop suggests that German businesses were worried about the debt crisis in Greece and its possible effect on Eurozone’s locomotive. The six month outlook measure also declined to 102 from 103.Analysts and investors were also concerned about the Greek situation. Business sentiment is expected to rise in July to 107.6.
2. US Durable Goods Orders: Monday, 12:30. The U.S. manufacturing sector lost momentum in May, new orders for long-lasting manufactured goods declined 1.8%, to $228.9 billion after April’s revised drop of 1.0%. Economists expected a smaller decline of 0.6% in orders. However, purchases of manufactured goods, excluding the volatile transportation sector, edged up 0.5% to $157.2 billion in May, following a 0.2% decline in April, while forecasted to rise 0.6%.  Nevertheless, economists believe data is stabilizing, choosing to ignore the headline figure due to volatility in the transportation sector. Orders for long-lasting manufactured goods expected to pick up by 3.2% in June, while Core orders forecasted to rise by 0.4%.
3. UK GDP: Tuesday, 8:30. The UK’s economic recovery softened in the first quarter of 2014 with GDP growth of 0.3%, according to a preliminary estimate. One of the weak points is the construction sector where output fell for the second consecutive quarter. According to The Office for National Statistics first quarter growth was the slowest since the fourth quarter of 2012. The annual rate of GDP growth declined to 2.4% from the 2.8% measured in the final quarter of 2014. The service sector which accounts for 75% of all goods and services in the economy, edged up 0.5% following 0.9% in the fourth quarter of 2014. The first estimate of growth for the second quarter is 0.7%.
4. US CB Consumer Confidence: Tuesday, 14:00. Consumer confidence strengthened in June, rising to 101.4 from 94.6 in May, suggesting the recent job gain boosted economic activity. On a yearly base consumer confidence edged up 17.4% from a year ago. Current conditions and the labor market index saw the biggest rise. Continued improvement in job market conditions and bigger wages increased optimism and consumer spending. Economists expect over 2% growth in the second quarter. Consumer confidence is expected to reach 100.1 this time.
5. US FOMC Statement: Wednesday, 18:00 The Fed’s statement from June 17 showed the economy is growing mildly after the winter plunge and is expected to increase its readiness for an interest rate hike by the end of the year. The FOMC forecasts a yearly growth of over 2%. However, Fed Chair Janet Yellen stated that the rate decision was still dependent on more decisive evidence from the labor market and stronger inflation. Economists do not forecast a rate hike just yet.
6. US GDP: Thursday, 12:30. The advance estimate of Q1 GDP, released April 29, showed the economy expanded a mere 0.2% in the first three months of 2015, well below the 1% increase forecasted by analysts. Consumer demand rose just 1.8%, less than the 2% that was expected by economists lower than initially estimated. Exports showed negative contribution as well as foreign investments, while imports increased. Analysts forecast a rebound in the second quarter with a growth estimate of over 2%. The advance release of GDP forecast for Q2 is expected to be 2.5%.
7. US Unemployment Claims: Thursday, 12:30. The number of Americans filing initial claims for unemployment benefits dropped last week to 255,000, the lowest level in more than 41-1/2 years. The sharp contraction in claims indicates the US labor market continued to strengthen in July. Job creation and stronger housing market suggest the Fed will raise rates in the near future. The four-week moving average of claims fell 4,000 to 278,500 last week. The number of claims is expected to reach 264,000 this week.
8. Canadian GDP: Friday, 12:30. Canada’s economy contracted 0.1% in April, posting the fourth consecutive month of negative growth. Economists forecasted a 0.1% growth in April. The continuous contraction raises concerns that Canada will be in recession this year. Canada’s economy shrank at annual pace of 0.6% in the first quarter, and April’s decline suggests a negative reading is probable for the second quarter. The mining, oil and gas sector shrank 2.6, contracting for the sixth consecutive month. Retail sales declined 0.2%, down for the third straight month. Manufacturing declined 0.2% declining for the fourth consecutive month.  GDP is expected to remain flat in May.

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Press review

Sergey Golubev, 2015.07.28 09:00

Deutsche Bank with updated EURUSD review: target at 1.02 by Q3-end (based on efxnews article)

The Deutsche Bank updated their view on EUR/USD summarized all the factors and made a conclusion about target EUR/USD at 1.02 by Q3-end:

• "The European outflow story remains fully on track. We continue to see European outflows as part of a multi-year shift in portfolio allocation behaviour towards foreign assets."
  
• "The most important is the Fed's re-investment policy on QE assets, because decisions here will determine the prospect of what would essentially be QT, or quantitative tightening: nearly half a trillion dollars matures in 2016, almost equivalent to a full QE program in reverse."
  
• "Irrespective of lift-off, the key point then is that Fed tightening is multi-dimensional and likely to steadily reinforce a persistent shift away from the dollar as the world's major funding currency."