Weekly EUR/USD Outlook: 2016, October 30 - October 06

EUR/USD struggled to recover, but it also did not extend its falls. A mix of PMIs, inflation figures and also GDP stand out at the turn of the month. Here is an outlook for the highlights of this week.

1. German Retail Sales: Monday, 7:00.
2. CPI: Monday, 10:00.
3. GDP: Monday, 10:00. The 19-country eurozone has grown by 0.3% q/q in Q2 2016, and further growth is on the cards also in Q3. Spain’s growth remains encouraging, but France lags behind.
4. Spanish Unemployment Change: Wednesday, 8:00.
5. Manufacturing PMIs: Wednesday morning: 8:15 for Spain, 8:45 for Italy, 8:50 the final number for France, 8:55 final figure for Germany and 9:00 final figure for the euro-zone.
6. German Unemployment Change: Wednesday, 8:55.
7. ECB Economic Bulletin: Thursday, 9:00. Two weeks after the European Central Bank left its policies unchanged, the Frankfurt-based institution releases the data that its members saw before making the decision.
8. Unemployment Rate: Thursday, 10:00.
9. Services PMIs: Friday morning: 8:15 for Spain, 8:45 for Italy, 8:50 the final number for France, 8:55 final figure for Germany and 9:00 final figure for the euro-zone.
10. PPI: Friday, 10:00.

the source

FOMC: "We believe that any taper tantrum angst is premature, however. Next week’s Fed meeting should make an explicit reference to a rate move in December but there seems to be less scope for aggressive tightening of US financial conditions given that the implied probability of a hike is already close to 75%. We doubt that there will be a sustained risk selloff either, especially if the non-farm payrolls and ISM data underpins the constructive outlook for the US economy and adds to the recent stream of positive economic surprises from around the world. Next to the Fed and US data, more evidence of growing demand for USD-funding, reflected in widening of EUR-USD and JPY-USD cross currency swap rates, and elevated USD/CNH rates, should keep USD supported."

BoE: "The BoE’s inflation report should attract some attention next week, not the least given that some analysts are still calling for a rate cut. We expect the MPC to keep policy unchanged and link any prospects of further easing to the path of the GBP, which according to Governor Carney has depreciated ‘substantially’ more recently. Data releases as well as indications that the UK government would pursue a somewhat ‘softer’ version of Brexit could also help GBP consolidate more broadly in the coming days."

RBA: "The RBA could revise up its inflation outlook and dash hopes for further easing from here, helping AUD regain more ground. Demand for carry trades could continue to support the AUD in the absence of sustained tightening of global financial conditions."

BoJ: "The former should alleviate recent market concerns about an imminent taper that was fuelled by a drop in the 10Y JGB yields to below zero. This together with the persistent steepness of the JGB yield curve should keep Japanese stocks and USD/JPY generally supported."

the source

"Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The Committee judges that the case for an increase in the federal funds rate has continued to strengthen but decided, for the time being, to wait for some further evidence of continued progress toward its objectives. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation."