After a rather poor reading of the German ZEW Economic Sentiment last month, caused by the upcoming EU referendum in the UK, the latest data came out rather strong at 19.2, up from 6.4 in May. With the investor sentiment being back on track financial market experts now have more confidence in the strength of the German economy. However, the EU referendum in the UK remains a great deal and a challenge. With all the ‘Brexit' turmoil, such as strong reading is definitely a positive surprise. In case of the ‘Brexit' Germany's economic growth would experience a severe setback, as the British country remains an important trading partner for Germany. As a result, the next GDP data figures could worsen dramatically, also meaning rising concerns for the Eurozone overall. In the meantime, ECB's president Mario Draghi stated on Tuesday, that the ECB is ready for such an undesired event, as a ‘Brexit'. He said that the European central bank is ready to take measures in order to stabilise the market turbulence should UK citizens decide to leave the EU. Moreover, Mario Draghi stated that the EU's economic recovery is expected to continue at a moderate rate, but at a steady one. However, he did note that there currently are issues concerning the inflation growth, but growth could have been significantly lower if not for the ECB's actions.
On Tuesday the head of the Federal Reserve, Janet Yellen, stated that there is ‘considerable uncertainty' in US growth outlook. She also brought to attention the fact that some data suggests the US economy keeps growing, but some events, like the upcoming ‘Brexit' referendum, bring the mentioned uncertainty. According to Yellen, the US economy is expected to reach full employment and its 2% inflation target within the next few years. Growing household incomes, improvements in the housing industry, along with low mortgage rates, should trigger improvements in the labour market to appear and, therefore, in the economy overall. Furthermore, Janet Yellen touched the question of the interest rates, explaining that the FOMC has been hesitant to do so due to periodicallydisappointing readings in the labour market, as well as inflation remaining below its key target. Also, she assured that some weakness in the labour market should not be considered as a game changer in the Fed's monetary policy decision, as there were strong readings present too. Finally, she warned about foreign risks, such as the slowdown in global economy, lower inflation and interest rates may cause investor risk appetite to arise. Amid these issues and concerns, the US monetary policy is not heading in only one direction, as adjustments must be made.
Upcoming fundamentals: Yellen testifies and EU release PMIs
EUR/USD falls to 1.1242 on Tuesday
Daily chart: The European currency started the week higher at 1.1329 against the US Dollar, as the Greenbacks lost value. However, for the past two days, the pair declined, and at the end of Tuesday's session it was at 1.1242, which is right above the weekly pivot point and 100-day SMA at 1.1236. On Wednesday morning, the currency exchange rate rebounded against the support provided by the before mentioned levels, and, at the moment, the rate is at 1.1265. In the meantime, aggregate technical indicators predict no change for the pair today.1.1219 and 1.1262.SWFX trader bearish sentiment decreases on Tuesday
Spreads (avg,pip) / Trading volume / Volatility
Average forecast says EUR/USD will trade at 1.12 by August
Meanwhile, traders, who were asked regarding their longer-term views on EUR/USD between May 22 and June 22 expect, on average, the currency pair around 1.12 by the end of August. Though 44% of participants believe the exchange rate will be generally below 1.12 in ninety days, with 27% alone seeing it below 1.08. Alongside, only 28% of those surveyed reckon the price will trade in the range between 1.12 and 1.18 on August 31.Dukascopy Community members are bullish on this week's perspectives of EUR/USD