25th June 2012
According to Bloomberg News, the Consumer spending stalled in May, a sign the biggest part of the U.S. economy may struggle as employment and wages cool, economists said before reports this week. Purchases were unchanged last month after a 0.3 percent gain in April, according to the median of 75 estimates in a Bloomberg News survey before Commerce Department figures due on June 29.
Central banks' failure to appreciate the limits of monetary policy can lead to the lenders being overburdened, with potentially serious adverse consequences, the Bank of International Settlements (BIS) warned in its annual report published Sunday.
Germany will confront an increasingly united bloc of euro-area nations demanding more ambitious policies to save the currency union this week, as European leaders prepare for a summit setting the course for the currency's preservation or ultimate demise. As concern mounts over their banking systems and finances, Spanish and Italian leaders have added their voices to those calling for more decisive action, a counterpoint to Germany's more incremental approach to solving the 2 1/2-year-old crisis. European Union leaders will attend pre-summit meetings as they work to narrow differences before the June 28-29 gathering in Brussels.
Chancellor Angela Merkel's government agreed to underwrite the debt of Germany's states, backing a form of burden-sharing that she is resisting at the euro-area level to combat the financial crisis. The federal government, facing pressure from the 16 states over tighter European Union budget rules that risked worsening a deficit squeeze, unexpectedly backed a form of shared liability to help the states meet constitutional budget limits, according to an article published by Bloomberg.
EUR/USD: The EUR/USD started the week on negative ground, hovering round the 23.6% Fibonacci level of the last falling wave (1.25357) on risk aversion. The pair is likely to fluctuate within the resistance level of 1.27550 and the support level of 1.24325 as sentiments and speculations as well as economic data in the Eurozone and the U.S will dictate the market this week. Speculations and Sentiments ahead of the European Union summit on the 28-29 June in Brussels will surely have an impact on the movements of the pair. Investor should be very prudent as significant volatility is expected throughout the week. Economic data that might impact on the pair this week are: Monday, data on new home sales in the U.S. Tuesday, the group Gfk will publish a report on German consumer climate in the Eurozone and data on house price inflation in the U.S. Wednesday; Germany will release data on consumer price inflation and the U.S. will publish data on durable goods orders, as well as data on pending home sales and a report on crude oil stockpiles. Thursday; EU leaders will hold the first day of talks at an economic summit in Brussels. Meanwhile, Germany will produce data on unemployment change while, the U.S. will release data on initial jobless claims. Friday; data on consumer price inflation in the Eurozone and Germany will release data on retail sales. Meanwhile, EU leaders will hold a second day of talks in Brussels. On the other hand, U.S. will release data on consumer price inflation and personal spending, followed by a report on the purchasing managers' index in Chicago and revised data from the University of Michigan on consumer sentiment.
GBP/USD: The GBP/USD began the week on positive ground as the later was trading slightly higher at 1.55808 at the time of writing on hopes for progress in resolving the crisis in the euro zone ahead of a European Union summit this week. The pair is likely to fluctuate within the resistance level of 1.57835 and the support level of 1.54538 as sentiment and speculations will be dictating the movements of the pair. In the week ahead, investors should be very prudent and wait for some news and economic data to come on market to get visibility on the GBP/USD as an important volatility is expected. Economic data in the U.K. which might affect the pair this week are; Tuesday, senior BoE policymakers, including Governor Mervyn King, will testify on inflation and the economic outlook before Parliament's Treasury Committee. In addition, U.K. will produce data on public sector net borrowing. Wednesday, the U.K. will produce industry data on mortgage approvals, followed by a report by the Confederation of British Industry on retail sales. Thursday, the U.K. will produce data on house price inflation, followed by official data on the country's current account and revised data on first quarter gross domestic product. The BoE will also publish a report on its credit conditions survey. Friday, the BoE Governor Mervyn King will speak before the release of the central bank's financial stability report. The U.K. will also release a report on consumer confidence.
GOLD: Gold was trading slightly higher at 1573.14 at the time of writing after a seemingly brief re-establishment of perceived safe-haven. The yellow metal is likely to fluctuate within the resistance level of 1634.46 and 1556.73 this week ahead of the European leaders' summit on 28-29 June and economic data in the Eurozone and U.S throughout the week. The trend of the commodity will be dictated by sentiments and speculations ahead of the busy and important week for the Eurozone and the U.S. In this situation, it's very difficult to predict the movement of the gold. Investors should adopt a wait and see strategy on the commodity. For more indications investors should closely monitor the price of the USD, as the USD and the Gold often trade inversely to each other.
DOW: The DOW was trading at 12509.2 at the time of writing after the Federal Reserve cut its economic forecast and a bear market in commodities prices dragged down energy producers. The index is likely to fluctuate within the resistance level of 12833.1 and the support level ahead of a critical week for the Eurozone and the U.S. Investors should closely monitor all news and economic data as well as the latest development in the Eurozone and the U.S to get visibility on the DOW. Given the low growth environment it will be very difficult to predict the trend of Index. It will be preferable to adopt a wait and see strategy on the DOW.
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