The EUR/USD pair ended a strongly bearish week after cutting the gains recorded earlier during the week, where the downbeat announcement made by the European Central Bank, which showed that European banks overnight deposits at the ECB inclined to all-time recorded on fears from the unsolved debt crisis, which in result meant that the ECB failed to provide sufficient liquidity to the market as bank tend to redeposit the additional funds rather than lending each other.
Moreover, pessimism spread in the market after the French bond sale, where the sentiment deteriorated after yields on French bonds surged to high record compared with yields on the German bunds. In addition, demand for the bonds was weak, which raised concerns that investors fear holding French long-term debt, and in result this could cost France its top credit rating of triple A’s.
Furthermore, the euro reached on Friday the lowest level recorded since September 2010 after the jobs report from the U.S, which showed that unemployment declined to 8.5% from 8.7%, where investors weighed the news positively and linked it to the recoveringU.S.economy, which in result supported the dollar to incline further and the euro to loose momentum.
This week the EUR/USD pair is expected very volatile due to the heavy load of fundamentals awaited from Europe and the United States, where the European Central Bank will announce rate decision on Thursday, with expectations the rate could remain unchanged at 1.0%, where the key rates will not be lowered again through 2012 unless the European Central Bank was forced to start quantitative easing, following the Fed and BoE previous actions.
Moreover, eyes will be focused on the several auctions due this week, as investors will be tracking the yields on European bonds and the demand for those bonds, where European nations need to raise funds in order to meet their obligations due in the first quarter of 2012, which amounts around 157 billion euros.
TheUnited Stateswill provide markets with the closely watched retail sales index for December, which is expected to expand in a steady pace at 0.2%. Better than expectations index could bring positivity to the market, where this should mean that theUnited Statesis on the right track of recovery.
In general this week will be a critical week for the EUR/USD pair and could determine whether the pair will return above the 1.3000 or it will slip under the 1.2500 level.
Other news from the euro area and the U.S. economy to affect the pair this week:
Monday January 9:
Germanywill start this week at 07:00 GMT with the trade balance figures for November, with expectations the trade surplus could have expanded to 12.0 billion euros from the previous 11.6 billion euros surplus. In addition, the seasonally adjusted exports index is projected to expand by 0.8% from the previous drop of 3.6%, while the seasonally adjusted imports previous index was -1.0%. Furthermore, the current account previous surplus was 10.3 billion euros.
At 11:00 GMTGermanywill provide the industrial production index for November, where the non-seasonally adjusted annual index is expected to expand by 3.6% from the previous expansion of 4.1%, while the seasonally adjusted monthly index could have fallen by 0.5% from the previous growth of 0.8%.
At 20:00 GMT theUnited Stateswill provide markets with the consumer credit figure for November, which could have narrowed to $7.000 billion from $7.645 billion.
Auctions:
Slovakiawill auction bonds at 10:00 GMT, whileGermanywill auction bonds at 10:15 GMT and finallyFrancewill sell bonds at 14:00 GMT.
Tuesday January 10:
TheUnited Stateswill join the session at 15:00 GMT with the wholesale inventories index for November, which could have expanded by 0.5% from the previous expansion of 1.6%.
Auctions:
Netherlandswill sell bonds at 09:00 GMT.
Austria,MaltaandGreecewill auction bonds at 10:00 GMT.
Sloveniawill auction bonds at 12:00 GMT.
Wednesday January 11:
The Federal Reserve will provide markets with the Beige Book at 19:00 GMT.
Auctions:
Germanywill sell bonds at 10:15 GMT.
Thursday January 12:
Germanywill 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
Friday January 13:
The euro zone will start the session at 10:00 GMT with the trade balance figures for November, where the seasonally adjusted trade surplus previous reading was 0.3 billion euros, while the non-seasonally adjusted surplus was 1.1 billion euros.
TheUnited Stateswill join the session at 13:30 GMT with the import price monthly index for December, which is expected to drop by 0.1% from the previous expansion of 0.7%.
TheUnited Stateswill also provide the trade balance figures for November, where the trade deficit is expected to widen to $44.9 billion from $43.5 billion.
Auctions:
Italy will auction bonds at 10:00 GMT.
Originally posted here
