EUR/USD Weekly Forecast - 18 June

Saturday, Jun 16 2018

EUR/USD resumed its falls, hit by a dovish Draghi and a power play by Powell. The European Central Bank finally announced its exit plans from the QE program: a cut of bond-buying to €15 billion between October and December and an end to purchases from 2019. However, they added a long list of conditions and most importantly, pledged to keep interest rates unchanged through the Summer of 2019. This sent the euro tumbling down quite spectacularly.

In the US, the Fed took the other direction by raising interest rates and signalled two more. Fed Chair Powell was optimistic about the economy and hinted increased pace of rate increases. In the background, trade tensions have risen after the US and Canada clashed in the G’7 Summit. Later, the US imposed tariffs on China.

Major events for the coming week:

Mario Draghi, President of the European Central Bank will host a conference in Portugal on Tuesday. It will be interesting to see if Draghi repeats the dovish message he conveyed in the post-rate decision presser. Another concerned speech, perhaps this time focusing on trade, could weigh on the euro. A focus on growth could help the common currency recover.
Current Account: Tuesday, 8:00. The euro-zone enjoys a broad current account surplus that reached 32 billion back in March. We will now get the belated data for April which is projected to show a narrower surplus of 30.3 billion.
German PPI: Wednesday, 6:00. Producer prices eventually feed into consumer prices. Germany’s PPI increased by 0.5% in April and a rise of 0.4% is on the cards for May.
Eurogroup Meetings: Thursday, with the ECOFIN on Friday. Finance ministers of the 19 euro-zone countries convene to discuss the economic situation and issues with various countries. This will be the first meeting after Italy and Spain formed new governments. Spain’s government is committed to a continuation, but Italy may take a different approach, challenging the budgetary restrictions. Clashes between Germany and Italy could weigh on the common currency.
Consumer Confidence: Thursday, 14:00. The survey of around 2,300 consumers has been stable at 0 points in the past four months, neither optimistic nor pessimistic. A repeat of the same score is on the cards. While a lot of progress has been made since the dark days of the crisis, consumers are still not really optimistic.
Flash PMI data: Friday: 7:00 for France, 7:30 for Germany, 8:00 for the euro-zone.
Belgian NBB Business Climate: Friday, 13:00. Similar to consumer confidence.