Euro/USD Weekly Outlook –May 14-18

The Euro/USD continued its downward trend during most of May. There are several reports that might also affect the Euro/USD including: U.S CPI, minutes of recent FOMC meeting, EU GDP for Q1 2012 and U.S. jobless claims.

Here is a short outlook for the Euro/USD currency including the main news items and events that may affect its direction for May 14th to May 18th

Forex Market May Update:

The Euro to USD declined by 1.27% during last week to reach on Friday 1.2917; during May, the Euro /USD decreased by 2.4%.

The chart below presents the downward trend of the Euro to USD during the past couple of weeks (UTD).

Chart Euro to us dollar Exchange Rates May 15Correlations among Exchange Rates – May Update

The chart below is the developments in the linear correlation (moving correlation) between the Euro/USD and the AUD/U.S dollar (daily percent changes) during the last several months (up to May 11th).

The chart shows the strong positive relation between the two exchange rates; furthermore the correlation has strengthened in the past couple weeks. The current correlation between the two daily percent changes of these currencies is nearly 0.64 for May. This may suggest the effect (if at all) of the Euro/USD on the direction of the AUD/USD is still slightly stronger than in the past.

Correlations Euro to us dollar and AUD USD  2011-2012 May 15

Current Forex Indexes May 14th

Euro to US Dollar is traded at 1.2868 a 0.38% decrease as of 9:40*.

AUD /USD is traded at 0.9971 a 0.48% decrease as of 09:40*.

(* GMT)

Euro/USD Related News for the Week

Monday– Euro Area Industrial Production: This report will present the changes in the industrial production of the EU during March; in the previous report the EU industrial production was up by 0.5% (M-O-M) during February;

Tuesday –German ZEW economic sentiment: During April the ZEW indicator for Germany slightly rose to 23.4; as Germany’s economy is keep showing progress, the Euro will plausibly remain strong against other currencies;

Tuesday – Euro Area GDP 1Q2012: During the Q4 2011, the Euro Area GDP contracted by 0.3% (Q-o-Q). This news might affect the Euro; the current expectations are of another a low growth rate or even another contraction for the first quarter; if there will be another contraction then technically it will mean Euro Area is in a recession;

Tuesday –U.S CPI: In the latest U.S PPI report the PPI declined by 0.2% (mainly due to the drop in oil prices), while the core PPI rose by 0.2%. According to the U.S Bureau of Labor statistics during March 2012, the core CPI rose by 0.3% (M-o-M) and also increased over the last 12 months by 2.9%;

Wednesday – ECB President Draghi Speaks: Following the ECB rate decision to keep the policy unchanged and the interest rate at 1% the President of the European Central Bank, Mario Draghi will talk in the  European Central Bank colloquium; the title of his speech is “Monetary Policy in Unconventional times“;

Wednesday – FOMC Meeting Minutes: Following the recent FOMC meeting, in which it was decided to keep the monetary policy unchanged. The minutes of the FOMC meeting might bring some insight behind this decision regarding the future steps of the FOMC;

Thursday – U.S. Jobless Claims Update:  in the previous report the jobless claims edged down to 367,000; this upcoming weekly update may affect the direction of the U.S dollar and consequently commodities;

Thursday – Philly Fed Manufacturing Index: In the previous survey, the growth rate moderately fell to +8.5 in April. If this trend will continue this index may adversely affect the U.S Dollar (the recent Philly Fed review);

Euro to USD Weekly Outlook

The ongoing developments in Greece will plausibly keep the anxiety levels high and thus may keep the Euro weak against the USD. Furthermore, if the upcoming EU reports (GDP) will be negative it could also further weaken the Euro. Finally the U.S reports including U.S CPI, Philly Fed and U.S jobless claims might also affect the Euro/USD assuming they will present sharp changes.

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