The EUR/USD pair declined sharply in the past session, cutting the gains recorded this week, where the pair was affected sharply by the announcement made by the German federal statistics office, which explained that Germany expanded by only 3.0% in 2011 from the previous growth of 3.7% recorded in 2010, where this slowdown was led by the decline in exports, noting that German economy depends mainly on exports.
The pair extended the losses yesterday after the office added that Germany could have contracted by 0.25% in the fourth quarter of 2011, raising fears and concerns that the debt crisis had affected the euro-area region’s largest economy sharply in the ended year.
Today, several factors are expected to affect the pair, starting with the European Central Bank rate decision, which is expected to linger at 1.0%; however, markets will shift their focus then to Draghi’s press conference, tracking the Bank’s new moves to tackle the debt crisis especially after Fitch Ratings yesterday demanded the bank to buy more indebted bonds and to widen the support to help nations in fighting the debt crisis.
During the U.S. session, the advanced retail sales index will pull all the attention, where investors are looking forward with hopeful eyes that the U.S. economy could have continued to lead the recovery.
Markets will also track the first Spanish and Italian bond sales in 2012, to track the changes in yields and demand, where with the possible downgrade threats to the French and Italian credit rating, the results of the auctions are hard to be expected.
However, pessimism is expected to remain evident and the euro could extend the losses in case the ECB disappointed markets as usual and provided nothing new to tackle the 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 harmonised 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.
TheUnited Stateswill also join the session at 13:30 GMT with the retail sales index for December, where the advanced index is expected to expand in a steady pace by 0.2%, while the retail sales index less autos is projected to expand by 0.3% from 0.2%.
The United States will also release the initial jobless claims (Jan 7), where the prior reading was 372 thousand claims.
At 15:00 GMT theUnited Stateswill provide markets with the business inventories index for November, which could have grown by 0.4% from 0.8%.
At 19:00 GMT theUnited Stateswill end the session with the monthly budget statement, which is expected at -$79.0 billion.
Auctions:
Spainwill auction bonds at 09:30 GMT, whileItalywill auction bonds at 10:00 GMT
Originally posted here
