The markets were reassured by the dovish speech of the ECB and U.S. indicators confirming the improvement of the U.S. economy.
The U.S. economy paints a rosy picture, especially with the U.S. employment report released last Friday. The country created more jobs than expected, with an unemployment rate unchanged however. "Job creations are close to 200,000 for four months of six," said Chris Low, economist at FTN Financial. However, the Fed warned that it would change its policy in case of improvement of the economic situation, with employment as the preferred indicator. This is ultimately what it did at its meeting on 18 and 19 June, deciding on a less accommodative monetary policy.
Many analysts expect that the early reduction in liquidity injections will be announced at the FOMC meeting on 17 and 18 September. By then, there will still have two publications of the employment figures.
In Europe, markets were reassured this last week by the European Central Bank (ECB) and the Bank of England (BoE) who have clearly explain thursday that "a tightening of monetary policy in these economies remains a very distant prospect" Contrary to what was recently suggested by the Fed, said ING bancassurance.
After the speech of Mark Carney, Governor of the Bank of England, Mario Draghi detailed his decision to keep its monetary policy unchanged earlier in the day Thursday. Mario Draghi's remarks also helped calm the bond market, where the 10-year-old Portugal had risen sharply after the collapse of a political crisis in the country, triggered by the resignation of two ministers- keys, including Finance Minister.
However, on the currency markets, the EUR and the GBP have clearly suffered the speech of the three central bankers. Hence the significant drop for the GBP that preceded an equally significant decline for EUR (with a drop of, respectively, 153 pips and 94 pips on Thursday 4).
With this shift, the Fed draws a new equilibrium in which investors are facing the great return of uncertainty. The abundance of liquidity was like the tree that hides the forest, a forest in which the signs of a slowdown in the global economy, the risk of the credit bubble in China, a risk of a bond bubble in emerging markets are being rediscovered. "As long as the Fed injected massive amounts of liquidity in the markets, investors were blind to these problems," says Patrick Artus, director of economic research at Natixis.
Now ahead of the uncertainty, markets stick to the real economy, and perform a movement of "flight to quality" in favor of the dollar. Indeed, in economic terms, the US economy is ahead, which should strengthen the current trend in favor of the U.S. dollar against other major currencies.
EUR / USD
For the coming week, the U.S. results season starts with Alcoa on Monday. Investors will scrutinize in particular, forecasts and expectations of turnover. Investors will be attentive, next wednesday, to the minutes of the last Fed meeting that will give more details about the future of monetary policy. Traders will follow Jobless claims on Thursday and the index of the University of Michigan consumer sentiment on Friday.
The European side, investors can measure the health of the economy with the industrial production for the month of May, especially in Germany (Monday), Tuesday in Britain, Italy and France on Wednesday. "A new drop in industrial production is likely to reinforce the idea that any relief, even in Germany, will be modest," warn economists at Capital Economics. Investors will also monitor a meeting of finance ministers of the eurozone Monday, and will focus on the situation in Greece and Portugal.
On the chartist, the trend remains bearish. All ot these factors should drive the EURUS below 1.2825 support first. Below 1.28 we will found 1.2750. In case of rebound, the first resistance at 1.29 have to be frankly broken to initiate a reversal towards 1.2957 (23.6% Fibo retracement) and beyond the 1.3090.
GBP / USD
On Tuesday, a battery of economic indicators should impacted the Footsie, with the trade balance for the UK, industrial production and the estimation of the National Institute of Economic and Social Research (NIESR) given for the month of June.
The Footsie closed, last Friday, at 1.4892, in a bearish trend, touching its level of 12 March 2013. The trend is clearly down on all time frame. Traders find the next support at 1.4857. Beyond it reached the lowest of 12 March to 1.4931 (corresponding to the lowest point of the Fibo retracement). Beyond it is the abyss with 1.4208 dated May 16, 2010.
bmethcapitalfx2.blogspot.fr
The U.S. economy paints a rosy picture, especially with the U.S. employment report released last Friday. The country created more jobs than expected, with an unemployment rate unchanged however. "Job creations are close to 200,000 for four months of six," said Chris Low, economist at FTN Financial. However, the Fed warned that it would change its policy in case of improvement of the economic situation, with employment as the preferred indicator. This is ultimately what it did at its meeting on 18 and 19 June, deciding on a less accommodative monetary policy.
Many analysts expect that the early reduction in liquidity injections will be announced at the FOMC meeting on 17 and 18 September. By then, there will still have two publications of the employment figures.
In Europe, markets were reassured this last week by the European Central Bank (ECB) and the Bank of England (BoE) who have clearly explain thursday that "a tightening of monetary policy in these economies remains a very distant prospect" Contrary to what was recently suggested by the Fed, said ING bancassurance.
After the speech of Mark Carney, Governor of the Bank of England, Mario Draghi detailed his decision to keep its monetary policy unchanged earlier in the day Thursday. Mario Draghi's remarks also helped calm the bond market, where the 10-year-old Portugal had risen sharply after the collapse of a political crisis in the country, triggered by the resignation of two ministers- keys, including Finance Minister.
However, on the currency markets, the EUR and the GBP have clearly suffered the speech of the three central bankers. Hence the significant drop for the GBP that preceded an equally significant decline for EUR (with a drop of, respectively, 153 pips and 94 pips on Thursday 4).
With this shift, the Fed draws a new equilibrium in which investors are facing the great return of uncertainty. The abundance of liquidity was like the tree that hides the forest, a forest in which the signs of a slowdown in the global economy, the risk of the credit bubble in China, a risk of a bond bubble in emerging markets are being rediscovered. "As long as the Fed injected massive amounts of liquidity in the markets, investors were blind to these problems," says Patrick Artus, director of economic research at Natixis.
Now ahead of the uncertainty, markets stick to the real economy, and perform a movement of "flight to quality" in favor of the dollar. Indeed, in economic terms, the US economy is ahead, which should strengthen the current trend in favor of the U.S. dollar against other major currencies.
EUR / USD
For the coming week, the U.S. results season starts with Alcoa on Monday. Investors will scrutinize in particular, forecasts and expectations of turnover. Investors will be attentive, next wednesday, to the minutes of the last Fed meeting that will give more details about the future of monetary policy. Traders will follow Jobless claims on Thursday and the index of the University of Michigan consumer sentiment on Friday.
The European side, investors can measure the health of the economy with the industrial production for the month of May, especially in Germany (Monday), Tuesday in Britain, Italy and France on Wednesday. "A new drop in industrial production is likely to reinforce the idea that any relief, even in Germany, will be modest," warn economists at Capital Economics. Investors will also monitor a meeting of finance ministers of the eurozone Monday, and will focus on the situation in Greece and Portugal.
On the chartist, the trend remains bearish. All ot these factors should drive the EURUS below 1.2825 support first. Below 1.28 we will found 1.2750. In case of rebound, the first resistance at 1.29 have to be frankly broken to initiate a reversal towards 1.2957 (23.6% Fibo retracement) and beyond the 1.3090.
GBP / USD
On Tuesday, a battery of economic indicators should impacted the Footsie, with the trade balance for the UK, industrial production and the estimation of the National Institute of Economic and Social Research (NIESR) given for the month of June.
The Footsie closed, last Friday, at 1.4892, in a bearish trend, touching its level of 12 March 2013. The trend is clearly down on all time frame. Traders find the next support at 1.4857. Beyond it reached the lowest of 12 March to 1.4931 (corresponding to the lowest point of the Fibo retracement). Beyond it is the abyss with 1.4208 dated May 16, 2010.
bmethcapitalfx2.blogspot.fr