The Week Ahead for the EUR: June 28 – July 2

Another eventful week has passed and the EUR-USD seems to be settling at around 1.23. The euro has advanced a little versus the dollar, but it is questionable how sustainable this move is. During the week, Ifo, PMI and industrial orders indicated that there will be robust economic expansion in the euro area in Q3. This weekend, world leaders gathered in Toronto for summits of the G8 and G20, has been seeking to balance growth and fiscal restraint in the attempt to avoid another financial crisis. It is important to keep an eye on the headlines coming from the meetings as the focus has been on the European debt crisis and on the decision to take further actions to narrow the European deficit and boost the overall confidence in markets.

Overall consensus: Slightly bullish. This upward potential trend for the Euro is likely to be limited as the ECB’s €442bn one-year tender matures next Thursday and wider credit spreads for southern European government bonds will be causes for concern.

The upcoming week has many employment and inflation figures, as well as the speech from Trichet. Here’s an outlook for this week’s events, and an updated technical analysis for EUR/USD.

Monday, June 28

The different German states will release their consumer price indices during the day, building up the initial release of German CPI. After a forecasted rise of 0.1% last month, prices are expected to increase by the same amount this time. Generally speaking, consumer price gains are expected to remain subdued in 2010 due to the weak growth prospects and, in particular, dull household spending. Germany precedes the all-European figure, making this figure important.

Meanwhile, the ECB will publish its monthly report on M3 growth. The amount of money in circulation dropped in recent months, signaling deflationary pressure. The year-over-year value fell by 0.1% last month. The forecast is for a 0.2% rise this time. It will be interesting to see what effect the euro debt crisis has had on the latest monetary developments.

Tuesday, June 29

No major market moving events for the Euro.

Wednesday, June 30

Germany will publish its unemployment rate and a report on the change of its unemployment figures. Europe’s largest economy has showed impressive drops in the number of unemployed people – 45,000 last month and 67,000 in the previous month. The figure is expected to continue its downtrend, but a smaller drop is predicted this time, 23,000, helping to stabilize the dropping euro.

Following the German Preliminary CPI of Monday, at 9:00 GMT the European CPI Flash estimate will be released by EuroStat. The Euro-zone’s annual rise in prices climbed to 1.6% in May, the highest reading since the beginning of the financial crisis. A slight drop is expected this time, with a forecasted inflation figure of 1.5%. Note that this is the initial release.

Later on the day, the ECB President Trichet will hold a press conference at the high-level Eurosystem Seminar with Central Banks and Monetary Agencies of the Gulf Cooperation Council, in Rome. The head of the ECB will have a chance to lay out his prospects for the Euro-zone, discussing a possibility of recovery and maybe future moves on the rates.

Thursday, July 1

Non major market moving events for the Euro.

Friday, July 2

At the end of the upcoming week, the EU unemployment rate will be published, which stands at around 10% in the past 6 months causing worries. The rate varies between Germany and France which have stronger economies, and countries like Spain, that has an unemployment rate of nearly 20%. The average 10% is expected to remain stable at 10.1%, which should be consistent with the PMIs released this week. A drop under this double digit figure will be a great relief.

What’s Important?

A few events to chew through this week, the G20 meetings will present a theme for the week. The German CPI, German Unemployment change and Fridays Eurozone Unemployment Rate numbers will have the greatest influence,

Key Words for the Week

G20 Meetings, German CPI, German Unemployment Change, Eurozone Unemployment rate.