EUR/USD Fundamental Forecast – June 20, 2016

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Published: Jun 17, 2016, 10:15 GMT+00:00

The EUR/USD gained 24 points as the US dollar eased today but there was no real reason for the shift except that the two currencies were returning to the

EUR/USD Fundamental Forecast – July 4, 2016

The EUR/USD gained 24 points as the US dollar eased today but there was no real reason for the shift except that the two currencies were returning to the longer term trading range. The euro is remaining surprisingly stable as the possibility of a UK exit should be shaking up the currency. The pair is trading at 1.1250. Data today showed that hourly labour costs within the Eurozone increased 1.7% in the year to the first quarter of 2016 from a 1.3% gain in the fourth quarter of 2015. The data should ease concerns over the risk of second-round deflationary effects from the very low rate of consumer inflation.

There was a 1.8% increase in wages and salaries, while non-wage costs rose by 1.5%. There was relatively little variation across sectors with a 2.0% increase in industry and 1.7% increase for services.

The increase overall should ease fears surrounding the risk of second-round effects of very low inflation. At this stage, there is no real evidence that headline inflation rates near or below zero are having a major impact on labour costs. This will be an important relief or the ECB, although the central bank will continue to monitor the situation very closely. Underlying cost increases are still subdued and there will be very little upward pressure on inflation.

The US Dollar experienced a modest reaction against its major counterparts following the release of the May US Consumer Price Index (CPI) data. The data showed that consumer prices increased 0.2 percent (MoM) and 1.0 percent (YoY). Both of these figures fell short of economists’ projections of 0.3 percent (MoM) and 1.1 percent (YoY). In addition, the readings cooled from April’s 0.4 percent (MoM) and 1.1 percent (YoY) pace.

Meanwhile, consumer prices excluding the volatile food and energy variables – often referred to as ‘core’ – came in at 0.2 percent (MoM) and 2.2 percent (YoY). Both values came in-line with expectations and were unchanged from April’s report. Referring to the Citigroup Global Markets’ US economic surprise index, data has tended to outperform relative to economists’ expectations since early May. With that in mind, today’s CPI data counters the trend.

FxEmpire provides in-depth analysis for each asset we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports, which covers the current week and are published by Sunday before the new week begins. Daily we share any new events, forecasts or analysis that affect the current day. To achieve a full accurate understanding it is important that you study all of our data and analysis as a whole.