Fundamental Reasons to Sell EUR - Credit Agricole

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Sergey Golubev, 2015.07.17 18:38

Forex Weekly Outlook July 20-24 (based on forexcrunch article)

A Greek deal was finally reached, but it didn’t help the euro. In general, the dollar enjoyed broad gains. The upcoming week features housing figures in the US as well as important events for the antipodean currencies. Here are the highlights of this week. Here is an outlook on these main events.

An “aGreekment” was reached in the early hours of Monday with a Greek capitulation on austerity after Grexit was put on the table. We are seeing signs of a return to normality but with so much bad blood, nobody is really happy and the euro is lower. The crisis could take a break before making a comeback.  Elsewhere, the dollar saw mixed numbers, with poor retail sales weighing. However, some better numbers and with a repeat of Yellen’s intention to raise rates this year, the dollar emerged as a winner especially against commodity currencies. USD/CAD touched 1.30, AUD/USD reached new lows despite OK Chinese GDP and  NZD/USD fell below the post crisis low. The only currency that beat the dollar quite nicely is the pound, thanks to hawkish comments by Carney. What’s next? Let’s start:

1. Glenn Stevens speaks: Wednesday, 3:05. Reserve Bank governor Glenn Stevens is scheduled to speak in Sydney. He may talk about the recent RBA’s recent decision to maintain rates at 2% as well as their intention to provide further easing measures, to boost recovery including another rate cut. Australia’s economic growth was weaker than forecast but is expected to rebound in the next two years. Stevens stated the RBA will monitor data and act accordingly. Will Stevens hit the Aussie when it’s down?
2. Existing Home Sales: Wednesday, 14:00. Sales of existing homes, aka second hand homes are the vast majority of the market. After reaching a level of 5.35 million (annualized)  in May, another advance to 5.41 million is on the cards. The Fed watches the housing sector, which goes hand in hand with economic cycles.
3. New Zealand rate decision: Wednesday, 21:00. New Zealand central bank cut interest rates for the first time in four years, reaching 3.25% protect the export-reliant economy from deflation risks. Despite four successive rate increases ending in July 2014 and satisfactory annual growth of 3%, the Central Bank decided to cut rates as milk prices slid more than 50% and demand from China softened. Economists expect, at least one more cut before the end of the year.
4. US Unemployment Claims: Thursday, 12:30. The number new applications for unemployment benefits declined more than expected last week, reaching 281,000. Economists expected an addition of 274,000 claims. The 15,000 decline indicates the US labor market is strong enough to support an interest rate hike this year despite a lingering weakness in the manufacturing sector. The four-week moving average of claims increased 3,250 to 282,500 last week. The four-week measure remained below the 300,000 line for the 16th straight week. The number of claims is expected to reach 285,000 this week.
5. Chinese Markit Flash Manufacturing PMI: Friday, 1:45. This independent measure of the Chinese economy could shed a better light on what’s going on there, after the positive GDP, which comes from the government. After a final score of 49.4 points in June, a small rise to 49.8  is expected, just below the 50 point mark separating growth from contraction.
6. New Home Sales: Friday, 14:00. While sales of new homes are only a small part of transactions, every sale has a wider impact on infrastructure and additional spending. After hitting a high of 546K back in May, a small slide to 541K is on the cards now.