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On Monday, July 13th 2015 the announcement of a third Greek bailout initially rallied the Euro, but the optimism was short lived as many doubts and obstacles remain. Over the next few weeks the Greek situation will continue to be front and center. Greek Prime Minister Tsipras needs to convince the Greek people to accept the terms of the new bailout after the referendum from Sunday, July 5th 2015 showed a resounding ‘No’ vote by the majority of Greek citizens. In addition the Eurogroup will face a potential standoff with the UK and other non-Eurozone members who are asked to contribute to the bailout which is likely to increase tensions.
On Tuesday, July 14th 2015 the Euro received overall bearish news as Eurozone industrial production unexpectedly contracted by 0.4% in May month-over-month and only rose 1.6% year-over-year. Economists surveyed expected an increase of 0.2% and 2.0% respectively which would have represented an improvement over the 0.1% increase and 0.9% reported in April. Furthermore, the Eurozone ZEW Economic Sentiment Survey dropped to 42.7 for July which compares to the 53.7 released for June. On the other side of the currency pair the US released a shocking contraction of 0.3% in advanced retail sales for June and excluding the volatile automobile sector, advanced retail sales still posted a contraction of 0.1%. Expectations called for an increase of 0.3% and 0.5% respectively which compares to the 1.0% and 0.8% increase reported in May. In addition the NFIB Small Business Optimism Index dropped to 94.1 against expectations for an increase to 98.5 in June from the 98.3 reported in May.
Today on Wednesday July 15th 2015 US Federal Chairwoman Jellen will deliver the scheduled semi-annual Testimony to the House Financial Panel which is likely to move the US Dollar late in the US trading session. Besides the testimony, industrial production as well as manufacturing production is expected to rebound in June. Economists expect an increase of 0.2% in industrial production and an increase of 0.1% in manufacturing production. This compares to the 0.2% contraction and 0.2% contraction reported in May respectively.
On Thursday, July 16th 2015 the focus will shift to the European Central Bank and the press conference chaired by ECB President Mario Draghi. Economists expect the key interest rate to remain unchanged at 0.10% while the marginal lending facility rate is also expected to remain unchanged at 0.30%. The deposit facility rate is likely to remain at -0.30%. The press conference by Mario Draghi is expected to impact the Euro. US Fed Chairwoman Jellen will give her second schedule semi-annual testimony, this time to the Senate Banking Panel. The Philadelphia Federal Reserve Index is expected to show a slowdown in the region with a reading of 12.0 for the month of July. This compares to the 15.2 reported in June.
On Friday, July 17th 2015 forex traders will receive important inflation data out of the US which will report its CPI for the month of June. Economists expect an increase of 0.3% month-over-month and an increase of 0.10 year-over-year. This compares to the 0.4% increase reported in May and the annualized flat reading. The core CPI is expected to increase by 0.2% monthly and 1.8% year-over-year. This would mark an increase as compared to the 0.1% increase reported in May month-over-month and the annualized increase of 1.7%. Rounding up this week’s key economic reports is housing data out of the US. Housing starts are expected to rise by 7.00% in June month-over-month while building permits are expected to contract by 8.00%. This compares to the 11.1% contraction in housing starts which was reported in May and the 11.80% increase in building permits.
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