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EUR/USD Rises on Speculation About ESM

July 25, 2012 by

EUR/USD climbed today, erasing yesterday’s losses, on speculations that the permanent European rescue fund (the ESM) would be given a banking license. The fund would get an access to the ECB funding, increasing its firepower. At the same time, the news from the United States was not good as manufacturing unexpectedly declined and new home sales fell more than was anticipated.

New home sales was at a seasonally adjusted annual rate of 350k in June. The median estimate of analysts was at 372k. The May reading was revised from 369k to 382k. (Event A on the chart.)

Crude oil inventories increased by 2.7 million barrels last week from the week before and are above the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 4.1 million barrels and are in the lower half of the average range. (Event B on the chart.)

Yesterday, a report on Richmond Fed manufacturing index, showing a drop from -1 in June to -17 in July. That was an unexpected turn of event as most traders expected an increase to 0. (Not shown on the chart.)

EUR/USD for 2012-07-25

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