EUR/USD (a 4-hour chart)
Last week volatility in the foreign exchange market was primarily due to disappointing economic data from China and pigeon comments from Fed Chairman Ben Bernanke. Unfortunately, these factors will also dictate the direction of currency flows in the coming weeks. Chinese Finance Minister said he expected 7% growth this year, which means the Q2 GDP will be lower than expected and growth in China will slow gradually during the year. A weak economic growth of China is not only unfavorable for commodity currencies but also for the risk appetite in general.
Chinese economic reports are important, but the market gets more impact from the Fed's policy. Bernanke will deliver his semi-annual report on the economy and monetary policy in the Senate chamber on Wednesday and Thursday. While we can not imagine the head of the central bank comments deviate much in his speech this week, before Congress, he may be forced to provide additional clarity regarding monetary policy.
The euro exchange rate resumed its slide against the U.S. dollar on the background of weak economic data and the new political problems in the region. Eurozone industrial production fell by 0.3% in May after rising 0.5% the previous month. This trend is likely to continue with the German ZEW survey of investor confidence this week. Portugal has asked the Three to postpone the quarterly review of the reforms to the end of August / beginning of September. This suggests that the country does not put its finances in order for the audit, but the government says that its request relates to political uncertainty.
After two days of strong growth, the British pound ended lower on Friday in relation to the U.S. dollar. The new governor of the Bank of England, Mark Carney expressed the opinion that it was necessary to increase the transparency of the central bank. This week, we get a much better idea of the extent of his attachment to mitigation after the release of the Bank of England minutes. Despite the strong volatility of the pound last week, very little economic data was presented.