31 Jul 2015
EUR/USD: strong dollar headwinds ahoy - BTMU
FXStreet (Guatemala) - Derek Halpenny, European Head of GMR the Bank of Tokyo Mitsubishi UFJ explained that EUR/USD remains under downward pressure in the near-term amidst broad-based US dollar strength.
Key Quotes:
"The US dollar has been outperforming more notably against commodity-linked and emerging market currencies. The Fed continues to inch closer to raising interest rates for the first time since June 2006. The probability of the first rate increase being delivered as early as in September has increased modestly although it is still judged as roughly a 50:50 call. The Fed has signalled that labour market conditions have improved further with only “some” further improvement required to justify tightening monetary policy.
"The release of the ADP survey in the week ahead is expected to reveal another solid month of employment growth in July providing support for the US dollar. The US economy has returned to more solid growth expanding by 2.3% in Q2 which is back in line with the average growth during the economic recovery and sufficient to prompt a further erosion of spare capacity."
"There are no major events from the euro-zone which could drive euro direction in the week ahead. The latest CPI report should confirm that inflation pressures remain uncomfortably low in the euro-zone. Renewed weakness in commodity prices has increased downside risks for inflation although the ECB is unlikely to ease further at the current juncture."
Key Quotes:
"The US dollar has been outperforming more notably against commodity-linked and emerging market currencies. The Fed continues to inch closer to raising interest rates for the first time since June 2006. The probability of the first rate increase being delivered as early as in September has increased modestly although it is still judged as roughly a 50:50 call. The Fed has signalled that labour market conditions have improved further with only “some” further improvement required to justify tightening monetary policy.
"The release of the ADP survey in the week ahead is expected to reveal another solid month of employment growth in July providing support for the US dollar. The US economy has returned to more solid growth expanding by 2.3% in Q2 which is back in line with the average growth during the economic recovery and sufficient to prompt a further erosion of spare capacity."
"There are no major events from the euro-zone which could drive euro direction in the week ahead. The latest CPI report should confirm that inflation pressures remain uncomfortably low in the euro-zone. Renewed weakness in commodity prices has increased downside risks for inflation although the ECB is unlikely to ease further at the current juncture."