Forex Pros – The euro rallied to a 16-month high against the weaker U.S. dollar last week, boosted by expectations for further euro zone rate hikes this year while speculation that the Federal Reserve will keep interest rates low weighed on the dollar.
EUR/USD hit 1.4648 on Thursday, the pair’s highest since December 15, 2009; the pair subsequently consolidated at 1.4559 by close of trade on Friday, surging 1.01% over the week.
The pair is likely to find support at 1.4203, last Monday’s low and short-term resistance at 1.4648, last Thursday’s high and a 16-month high.
The euro’s gains came as signs that the region’s economy is gathering momentum fueled speculation the European Central Bank will raise interest rates further this year.
Data on Tuesday showed Europe’s services and manufacturing growth unexpectedly accelerated in April, suggesting the region’s economy is weathering surging energy costs and austerity measures. A separate report showed that higher energy costs pushed German inflation to 2.3% in March.
The ECB, which aims to keep inflation below 2%, raised its key interest rate by a quarter-percentage point to 1.25% earlier this month and left the door open for further rate increases this year.
The single currency’s gains came despite the continuing possibility of a Greek debt restructuring, which would exacerbate fiscal problems facing weak euro zone countries.
Earlier in the week, Standard & Poor’s warned the U.S. government that it risked losing its AAA credit rating unless policy makers agree on a plan by 2013 to reduce budget deficits and the national debt. S&P maintained its top rating on U.S. long-term debt while lowering the outlook to negative for the first time.
Looking ahead, in a week that will be shortened by holidays in many places, the highlight will be on Wednesday, when Fed Chairman Ben Bernanke holds a press conference after the bank’s rate setting meeting, the first ever regularly scheduled briefing by a Fed chief in the U.S. central bank’s 97-year history.
The euro zone, meanwhile, is to publish preliminary data on consumer price inflation.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets.
Monday, April 25
Markets in the euro zone, the U.K., Switzerland, Australia and New Zealand will all be closed for the Easter Monday holiday.
Meanwhile, the U.S. is to publish government data on new home sales, a leading indicator of economic health.
Tuesday, April 26
The U.S. is to publish reports on house price inflation and consumer confidence, as well as official data on manufacturing activity in Richmond.
Wednesday, April 26
In the euro zone, market research group Gfk is to publish data on German consumer climate. Also Wednesday, Germany is to publish preliminary data on consumer price inflation while the single currency bloc is to release official data on industrial new orders, a leading indicator of industrial production.
The U.S. is to publish official data on durable goods orders, a leading indicator of production and crude oil inventories. Also Wednesday, the Federal Reserve is to announce its federal funds rate. The announcement is to be followed by the first ever regularly scheduled briefing by a Fed chief in the U.S. central bank’s 97-year history.
Thursday, April 27
In the euro zone, German is to publish official data on employment change and import prices while France is to publish official data on consumer spending. Elsewhere, in the U.K., market research group Gfk is to publish data on consumer confidence.
Also Thursday, the U.S. is to publish advance data on first quarter gross domestic product, the broadest measure of economic activity and the primary gauge of the economy’s health. The country is also to publish government data on initial jobless claims and a report on pending home sales.
Friday, April 29
In the euro zone, Germany is to publish official data on retail sales, while both Italy and the wider economic zone are to publish preliminary data on consumer price inflation as well as a report on the unemployment rate. Meanwhile, the ECB is to publish a report on M3 money supply and private lending.
The U.S. is to round up the week by releasing a flurry of data, with a government report on personal spending, personal income and personal consumption expenditures. The U.S. is also to publish a report on manufacturing activity in the in the Chicago area, while the University of Michigan is to publish revised data on consumer sentiment and inflation expectations.
Later in the day, Fed Chairman Ben Bernanke is to speak at a public engagement. His comments will be closely watched for any clues to the possible future direction of monetary policy.
ForexPros.com
