Daily Insight
Group Economics Macro & Financial Markets Research
4 May 2016
Limited upside EUR/USD Georgette Boele Co-ordinator FX & Precious Metals Strategy Tel: +31 20 629 7789 georgette.boele@nl.abnamro.com
EUR/USD rally likely to trigger dovish comments from ECB officials
We expect EUR/USD to remain in the 1.10-1.20 range
Gold, silver and platinum prices rallied 20-26% ytd…
…and we expect the rally to continue in 2016 and 2017
EUR/USD rally likely to trigger ECB comments Since 25 April 2016, EUR/USD has been on an upward trend. EUR/USD has rallied more than 3% to a high on 3 May just above 1.16. This rally has mainly been fuelled by a weaker US dollar, following weaker than expected US economic data releases and a downward adjustment in Fed rate hike expectations. EUR/USD may rally towards 1.20 if US economic data continue to come in weaker than expected in the coming time. However, there appears to be a tendency among ECB officials to make dovish comments when EUR/USD is in the 1.151.20 area. We also expect this to happen this time around. If there is a significant uptrend in the euro, the ECB could take action and ease monetary policy further given the downside risks to inflation. Overall, we expect EUR/USD to be range-bound for the foreseeable future at around 1.15, within a 1.10-1.20 range. However, the longer-term picture has changed for the US dollar. We think that the multi-year bull trend of the US dollar has come to an end. So if the range in EUR/USD is broken, it will likely be on the USD weakness side in our view.
Our expected range for EUR/USD Level
1.40
1.30
1.20
1.10
1.00 12
13
13
14
14
15
Source: Bloomberg
Insights.abnamro.nl/en
15
16
2
Daily Insight – Limited upside EUR/USD– 4 May 2016
Gold prices have hit our end of June target of USD 1,300 per ounce… Precious metal prices have rallied strongly so far this year; gold, silver and platinum prices have rallied by 20-26%. Last week, gold prices finally broke out of the range and cleared the price peak (USD 1,280 per ounce) that was in place since 10 March 2016. This week, gold prices rallied to above USD 1,300 per ounce, our end of June target. Since then, there has been some consolidation ahead of the US employment report on Friday. A weaker US dollar after the weaker-than-expected Q1 US GDP data has been a crucial driver for higher precious metal prices recently. We think that the positive momentum is here to stay and that prices will rally further during the course of this year and next year. Our year-end forecast for gold and silver are USD 1,370 and USD 20 per ounce respectively (see our Precious Metals Watch: New silver & platinum forecasts). However, on an intra-day and intra-week timeframe, price volatility could happen as we saw two weeks ago when silver prices dropped around 5% after having rallied to a new high (21 April 2016).
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Daily Insight – Limited upside EUR/USD – 4 May 2016
Day
Date
Time
Country
Key Economic Indicators and Events
Period
Latest outcome
Consensus
Sunday Sunday
01/05/2016 01/05/2016
03:00:00 03:00:00
CN CN
PMI manufacturing - index (official) PMI non-manufacturing - index (official)
Apr Apr
50.1 53.5
50.3
Monday Monday Monday Monday
02/05/2016 02/05/2016 02/05/2016 02/05/2016
09:00:00 10:00:00 15:45:00 16:00:00
NE EC US US
PMI PMI manufacturing - index Markit - Flash PMI ISM manufacturing - index
Apr Apr F Apr F Apr
52.6 51.7 50.8 50.8
51.3
Tuesday Tuesday
03/05/2016 03/05/2016
03:45:00 10:30:00
CN GB
PMI manufacturing - index (Caixin) PMI manufacturing - index
Apr Apr
49.4 49.2
49.8 51.2
Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday
04/05/2016 04/05/2016 04/05/2016 04/05/2016 04/05/2016 04/05/2016 04/05/2016 04/05/2016
10:00:00 10:00:00 11:00:00 14:15:00 14:30:00 14:30:00 16:00:00 16:00:00
EC EC EC US US US US US
Composite PMI output PMI services - index Retail sales - % mom ADP nat. employment report - thousands Trade balance - USD bn Output per hour nonfarm business sector - % qoq ISM non-manufacturing, index New durable goods orders - % mom
Apr F Apr F Mar Apr Mar 1Q P Apr Mar F
53.0 53.2 0.2 200 -47.1 -2.2 54.5 0.8
53.0 53.2 -0.1 190 -44.6 -1.3 54.8
55.0
Thursday Thursday Thursday Thursday Thursday
05/05/2016 05/05/2016 05/05/2016 05/05/2016 05/05/2016
03:45:00 10:30:00 13:00:00 14:30:00 20:00:00
CN GB CZ US MX
PMI services - index (Caixin) PMI services - index Repo rate - % Initial jobless claims - thousands Policy rate - %
Apr Apr May 5 Apr 30 May 5
52.2 53.7 0.05 257 3.75
53.5 0.05
0.05
Friday Friday Friday Friday Friday Friday
06/05/2016 06/05/2016 06/05/2016 06/05/2016 06/05/2016 06/05/2016
09:00:00 14:30:00 14:30:00 14:30:00 21:00:00
CH US US US US PL
Foreign currency reserves - CHF mln Change in employment private employment - thousands Change in employment total - thousands Unemployment - % Fed Reserve consumer credit - USD bn Reference rate - %
Apr Apr Apr Apr Mar May 6
575831 195 215 5.0 17.2 1.5
ABN AMRO
53.7 51.5 51.0
185
3.75
193 202 5.0 16.2 1.5
185 195 5.0 1.5
Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected k ey variables and events)
Find out more about Group Economics at: https://insights.abnamro.nl/en/
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