The EUR/CHF pair fluctuated heavily yesterday, yet lost slightly after the downbeat news from the German federal statistics office, which explained that Germany could have expanded by 3.0% in 2011, compared with 3.7% in 2010.
The sentiment remained fragile after the debt concerns returned to the market after the office added that Germany could drop 0.25% in the fourth quarter of 2011, where fears spread that the debt crisis is affecting the largest economy in euro zone and now leaders must act firmly before the collapse of the euro.
Today more volatility will be seen in the market with the critical rate decision from the European Central Bank, where the Bank is projected to leave rates as they are at 1.0%, yet markets will track other actions from the ECB to tackle the debt crisis as Draghi could announced at the press conference which follows the rate decision.
In their first test in 2012, Italy and Spain will sell bonds today in order to raise funds to meet their obligations; however, eyes will track the borrowing cost and demand for those bonds, especially after Fitch warned Italy and Spain with a possible downgrade as soon as the end of this month in case European leaders were not able to set a comprehensive plan to shield those large economies from the escalating debt crisis.
Germany will start the session at 07:00 GMT with the final consumer price index for December, where the monthly index is expected unrevised at 0.7%, while the annual index is projected unchanged at 2.1%. In addition, the CPI EU harmonized monthly index is expected steady at 0.8%, while the annual index could have lingered at 2.4% in the month of December.
The euro zone will join this week today at 10:00 GMT with the industrial production index for November, where the monthly index could have dropped by 0.2% from the prior drop of 0.1%, while the annual index previous reading was 1.3%.
At 12:45 GMT the European Central Bank’s Governing Council will announce interest rates.
At 13:30 GMT Mario Draghi, the European Central Bank President, will speak at the press conference.
Auctions:
Spain will auction bonds at 09:30 GMT, while Italy will auction bonds at 10:00 GMT.
Originally posted here
