30 May 2014
EUR/USD: Eventful week ahead - Commerzbank
FXStreet (Córdoba) - Lutz Karpowitz, analyst at Commerzbank commented that they are not seeing euro weakness on account of the ECB rate cut expected next week, as this has already been factored in but their model points instead almost exclusively to the dollar's strength as the reason for the EUR/USD decline.
Key Quotes
“There should be a number of new factors affecting the forex markets next week, starting on
Monday when German consumer price data and the US ISM index are due out. Since the
market has already priced in an ECB rate cut, the former data (and other Euro zone figures due out on Tuesday) will probably only have any real impact on the market if they come in much higher than expected. In contrast, if the ISM has risen, this should give an additional boost to the dollar”.
“But attention will be focused on the ECB's decision on interest rates next Thursday. The
expected rate cut would put pressure on the euro primarily if the market viewed the move as a final step before the ECB launched a bond purchase programme. So yet again, much will
depend on the subsequent press conference”.
“And then of course there's the US labour-market report next Friday. It will hardly have any
impact on the speed at which the Fed pursues its QE policy over the coming months, as this is clearly running on auto-pilot”.
“The situation is different though with regard to the gap in time between the end of QE and the first rate hike. The fact that Fed chairman Janet Yellen is still unhappy about developments on the labour market, and is therefore inclined to continue deferring a rate hike, will no doubt come to be seen as increasingly hard to swallow on the forex market, given the steadily strong labour-market figures”.
Key Quotes
“There should be a number of new factors affecting the forex markets next week, starting on
Monday when German consumer price data and the US ISM index are due out. Since the
market has already priced in an ECB rate cut, the former data (and other Euro zone figures due out on Tuesday) will probably only have any real impact on the market if they come in much higher than expected. In contrast, if the ISM has risen, this should give an additional boost to the dollar”.
“But attention will be focused on the ECB's decision on interest rates next Thursday. The
expected rate cut would put pressure on the euro primarily if the market viewed the move as a final step before the ECB launched a bond purchase programme. So yet again, much will
depend on the subsequent press conference”.
“And then of course there's the US labour-market report next Friday. It will hardly have any
impact on the speed at which the Fed pursues its QE policy over the coming months, as this is clearly running on auto-pilot”.
“The situation is different though with regard to the gap in time between the end of QE and the first rate hike. The fact that Fed chairman Janet Yellen is still unhappy about developments on the labour market, and is therefore inclined to continue deferring a rate hike, will no doubt come to be seen as increasingly hard to swallow on the forex market, given the steadily strong labour-market figures”.