EUR/USD Week Recap | 18th-22 th May 2015
This past week, The EUR/USD pair followed a bearish trend, starting its decline back on Monday going from 1,1466 to the three weeks lowest level of 1,1013 as Friday 22th. EUR depreciation was expected as an ECB Officer recently spoke about a boost of the QE in the months of May and June, as a manner of contrast to the expected bond market slowdown in July and August. QE is generally negative for a currency as it contributes to drive rates down. On top of this, Greece troubled position still remains unclear to the market and an exit could not still be excluded, and this event for some could be as harmful for the European Financial Markets as the Lehman’s chapter 11.
On the other side, US economy is performing weaker than expected as shown from data such as manufacturing and retail sales that led to a downward revision of the first-quarter annualized growth rate, initially estimated at 0,2%. Moreover, consumer spending is generally low, even though an increase due to low oil price was expected and this brought concerns about the status of real economy. Industrial and manufacturing production are still below expectations. For these reasons, several FED officers strongly believe that the interest rate hike will definitely be postponed.
Next week it is expected to be very calm for the EUR/USD pair, as very few new macroeconomic data of minor importance will be released. According to my analysis, unless some changes occur with Greece, the EUR/USD pair will keep stable with minimal EUR depreciation (EUR/USD goes down) as the overall outlook of the American economy seems more substantial and stable than the European one.
Ludovico Buffo, Master Student