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Forex - EUR/USD weekly outlook: June 18 - 22

Published 06/17/2012, 10:47 AM
Updated 06/17/2012, 10:47 AM
Investing.com - The euro ended the week almost unchanged against the U.S. dollar on Friday, as political uncertainty in Greece dominated market sentiment ahead if key elections that will potentially determine Athens’ fate within the euro zone. 

EUR/USD hit 1.2663 on Friday, the pair’s highest since June 11; the pair subsequently consolidated at 1.2635 by close of trade on Friday, little changed on the week.

The pair was likely to find support at 1.2541, Thursday’s low and resistance at 1.2748, the high of May 17.

The euro found mild support on Friday, amid expectations that world central banks will implement measures to calm market turmoil in the event of a victory for anti-bailout parties in the Greek elections.

On Friday, the European Central Bank said it would continue to supply liquidity to banks as necessary, one day after the Bank of England announced an emergency liquidity package to support the U.K. banking system.

But investors remained cautious, as the yield on Spanish 10-year bonds climbed to a euro-era high on Thursday, after ratings agency Moody’s cut the country’s credit rating by three notches to just above junk status, citing its rising debt burden and weakening economy.

The spike in borrowing costs came in spite of efforts to insulate Madrid from the effects of the ongoing sovereign debt crisis by agreeing on a EUR100 billion aid package for Spanish banks.

Spanish 10-year bond yields eased back to settle at 6.87% on Friday, but remained close to the critical 7% threshold which prompted bailouts in Greece, Ireland and Portugal.

Meanwhile, the greenback was weighed by growing expectations that the Federal Reserve may announce fresh stimulus measures following its meeting next week after a recent string of weak economic data.

Data on Friday showed that U.S. consumer sentiment fell to a six-month low in June, fuelling concerns that economic growth is faltering. Separate reports showed that an index of manufacturing activity in New York dropped sharply in June, while U.S. manufacturing output fell in May for the second time in three months.

In the week ahead, investor sentiment is likely to be decided by the outcome of Sunday’s elections in Greece, while a G-20 summit due to start Monday may produce fresh measures to combat the crisis in Europe.

Meanwhile, market participants will be closely watching the outcome of the Federal Reserve’s monetary policy meeting on Wednesday.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.

Monday, June 18

Leaders from the Group of 20 nations are to begin a two-day summit in Mexico.

Tuesday, June 19

In the euro zone, the ZEW Institute is to release reports on economic sentiment in Germany and the whole euro area.

The U.S. is to publish official reports on building permits and housing starts, leading indicators of health in the housing sector.

Leaders from the Group of 20 nations are to hold a second day of talks at a summit in Mexico.

Wednesday, June 20

In the euro zone, Germany is to release official data on producer price inflation, a leading indicator of consumer inflation.

Later Wednesday, the Federal Reserve is to announce its benchmark interest rate and publish its rate statement and economic projections. The data is to be followed by a press conference with Fed Chairman Ben Bernanke to discuss the monetary policy decision. The U.S. is also to release government data on crude oil stockpiles:

Thursday, June 21

The euro zone is to release preliminary data on manufacturing and service sector activity, while Germany and France are also to release individual reports. Later in the day, ECB President Mario Draghi is due to speak; his comments will be closely watched.

The U.S. is to produce government data on unemployment claims, followed by preliminary data on manufacturing activity and an industry report on existing home sales. The country is also to release data on manufacturing activity in the Philadelphia area.

Friday, June 22

The euro zone is to produce a report by the Ifo Institute of Economic Research on Germany’s business climate, a key indicator of economic health. Meanwhile, finance ministers from European Union member states are set to hold talks in Brussels.


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