Euro/USD Weekly Outlook –May 7-11

The Euro/USD sharply declined during the past couple of weeks but it is still dwelling in the range between 1.305 and 1.325 in over a month. Will this stalemate continue during this week? The disappointing U.S labor report, which was published on Friday, may have also contributed to the fall of the Euro.  The recent results of the French and Greek elections don’t seem to have a positive effect on the Euro and many contribute to its downward trend during the week. There are several reports that might also affect the Euro/USD including: U.S trade balance report, a speech by the Fed Chairman, Germany factory orders, ECB President Speech and U.S. jobless claims.

Here is a short outlook for the Euro/USD exchange rate including the main news items and events that may affect its direction for May 7th to May 11th

Forex Market May Update:

The Euro to USD declined by 1.3% during last week to reach on Friday 1.3083; during May, the Euro /USD decreased by 1.2%.

The chart below shows the development of the Euro to USD during April and May (UTD).

Chart Euro to us dollar Exchange Rates May 7Correlations among Exchange Rates – May Update

The chart below is the shifts in the linear correlation (moving correlation) between the Euro/USD and the GBP/U.S dollar (daily percent changes) during the last several months (up to May 7th).

The chart shows the strong positive relation between the two exchange rates, but the correlation has weakened in the past several weeks. The current correlation between the two daily percent changes of these currencies is nearly 0.61 for April/May. This may suggest the effect (if at all) of the Euro/USD on the direction of the GBP/USD is still slightly weaker than in the past but is still robust.

 

Correlations Euro to us dollar and GBP USD  2011-2012 May 7

Current Forex Indexes May 8th

Euro to US Dollar is traded at 1.3024 a 0.21% decrease as of 11:43*.

GBP /USD is traded at 1.6141 a 0.30% decrease as of 11:43*.

(* GMT)

Euro/USD Related News for the Week

Tuesday 15:30 – ECB President Draghi Speaks: Following the ECB rate decision to keep in unchanged at 1% Mario Draghi will give a speech; his speech may include the recent events in Europe and may talk about the ECB’s monetary plan if he will refer to implementing LTRO 3 or resuming the SMP this may influence the Euro/USD;

Thursday 12:00 – Great Britain Bank Rate Decision: Bank of England will decide on its basic rate for May 2012 and the progress of its asset purchase plan; as of April the BOE’s rate was still flat at 0.5% and the asset purchase plan of £325 billion continues;

Wednesday 18:00 – 10 Year Bond Auction: the U.S government will issue a bond auction;

Thursday 13:30 –American Trade Balance: This monthly report for March 2012 will present the developments in imports and exports of goods and services to and from the U.S; The American trade balance report for February 2012 the goods and services deficit decreased during the month to $46 billion.

Thursday 13:30 – U.S. Jobless Claims Weekly Update:  this report will refer to the weekly changes in the initial jobless claims for the week ending on May 5th; in the previous report the jobless claims sharply declined to 365,000; this upcoming weekly report may affect the path of the USD;

Thursday 14:30 – Bernanke Speech: following the FOMC meeting of April the Chairman of the Federal Reserve will give a speech regarding the US banking that may affect the direction of forex and commodities markets. The title of the speech is ” Banks and Bank Lending: The State of Play “;

Euro to USD Weekly Outlook

The news from France and Greece will probably keep the anxiety levels high and thus may contribute to the weak Euro. On the other hand if the ECB President will talk about expanding the role of ECB in the containing the EU debt crisis this might strengthen the Euro. Finally the U.S reports including U.S trade balance and Europe based news and events including GB rate decision and ECB President Speech might also affect the Euro/USD.

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