By FX Empire.com
The EUR/USD fluctuated heavily with the start of the week as investors continued to assess the impact of the G20 pledges on the market while reacting negatively to downbeat German comments.
The market started the session on Monday with continued optimism that European leaders are walking in the right path to contain the crisis and will present a comprehensive plan next week when the leaders meet on October 23.
The plans are to focus on putting Greece on a sustainable while also focus on supporting banks and recapitalization and expanding the firepower of the EFSF; nevertheless, the optimism faded into the European session after comments from Merkel’s spokesman were downbeat signaling the mixed view among leaders again as Merkel said that expecting a final fix to the crisis is not realistic and the summit will not conclude with all the measures saying the solution will extend into next year.
This change in the rhetoric suppressed the upside momentum and drove the euro to the downside versus the dollar as the market will remain volatile and mixed until the final plan is released.
On Tuesday we expect the volatility to remain evident especially with more data due from the euro area and the expected decline in confidence confirming the critical condition in the area.
Germany will start at 09:00 GMT with the Zew sentiment survey for October where the Current Situation index is expected to drop to 42.3 from 43.6 while the Economic Sentiment index to fall to -44.5 from -43.3.
The euro area Zew Economic Sentiment for October is due at 09:00 GMT which is not likely to have improved from September’s -44.6.
At 12:30 GMT the U.S. Producer Price Index for September is due and expected with 0.2% rise on the month after it remained unchanged in August and on the year to ease to 6.4% from 6.5%. Core PPI index is expected also with 0.1% on the month in line with August and on the year to ease to 2.4% from 2.5%.
At 13:00 GMT the August TIC flows is due after in July the net long-term TIC flows recorded $9.5 billion rise and the total net TIC flows recorded net selling of $51.8 billion.
