By FX Empire.com

The EUR/USD pair ended a mixed week with optimism dominating the market; however, during the week the pair fluctuated heavily between a high of 1.3858 and a low of 1.3483 due to the high level of uncertainty in addition to the political instability in Greece and Italy.

However, the sentiment improved somehow in Europe, after Italy took steps to support markets and restore confidence, where Italy urged to implement the austerity measures demanded by the European Union and the European Central Bank, as the nation aims to protect itself from following Greece’s steps into deep crisis, especially when several lawmakers described Italy as too be to bailout, while Italian failure could trigger European failure and the one currency union to fall.

The Italian upper house (Senators) approved the austerity measures on Friday, following the approval by the upper house budget committee on Thursday, and now all the focus will turn to the lower house (House of Deputies), which is expected to vote on the measures on Saturday. An approval could trigger more optimism to the market, as the Italian Prime Minister, Silvio Berlusconi agreed to step down and his party is easing their restriction to calling for early elections and approved on assigning new Prime Minister instead; however, we look forward to Italy with hopeful eyes that the nation will act in a faster pace than Greece and end the political instability as soon as possible.

Greece on the other hand was able to end the political instability and announced that Lucas Papademos is the new Premier, while George Papandreou agreed to step down and canceled his decision of holding a general referendum, which supported markets to rebound; however, all eyes are looking forward to the new Prime Minister whose objective is obtaining financial aid as soon as possible, where Greece could face bankruptcy by mid December without any financial aid.

This week, we expect volatility and heavy fluctuations to dominate the market, and especially the EUR/USD pair, awaiting major fundamentals from Europe, Germany and the United States, where the gross domestic product in addition to inflation data will highlight our European sessions, while the inflation and retail sales figures from the United states will be the main fundamentals in New York sessions.

Other news from the euro area and the U.S. economy to affect the pair this week:

Monday November 14:

The euro area will start the week with September’s Industrial Production at 10:00 GMT which is expected with 1.5% drop after 1.2% rise.

Tuesday November 15:

Germany will start the day with the GDP for the third quarter at 07:00 GMT where the economy is expected to expand by 0.5% after 0.1% the previous quarter.

From Germany we also have the Zew Survey for November at 10:00 GMT where the Current Situation index is expected to slow to 35.0 from 38.4 and the Economic Sentiment Index to fall further to -52.0 from -48.3.

Turning to the euro area, the GDP is also due at 10:00 GMT where the economy is expected to have contracted as well by 0.2% in the third quarter in line with the pace seen in the second quarter.

The Trade Balance is due at the same time for the month of September which is expected to hold at 1.0 billion euros deficit from the previous month.

The U.S. economy will start the data at 13:30 GMT with the Producer Price Index for October which is expected with 0.1% drop after 0.8% rise and on the year to ease to 6.3% from 6.9%. Excluding food and energy it is expected with 0.1% rise from 0.2% and on the year to rise to 2.9% from 2.5%.

Also at the same time we have the Retail Sales Index for October which is expected to slow with 0.3% gain after 1.1% surge and excluding autos to rise 0.2% after 0.6% rise in September.

As for the Empire Manufacturing Index for November it is expected to ease the contraction to -2.30 from -8.48.

At 15:00 GMT the Business Inventories for September are due and expected to slow to 0.2% from 0.5% previous rise.

Wednesday November 16:

The euro area will release the Consumer Price Index for October at 10:00 GMT where it is expected to ease to 0.3% on the month following 0.8% rise while to hold at 3.0% on the year.

The inflation week continues in the United States with the Consumer Price Index for October at 13:30 GMT. The index is expected to remain flat after a gain of 0.3% and on the year to ease to 3.6% from 3.9%. Core CPI is expected is expected to remain at 0.1% in line with September and on the year to rise to 2.1% from 2.0%.

At 14:00 GMT we have September’s TIC flows after Total net TIC Flows rose to $89.6 billion in August.

At 14:15 GMT we have the Industrial Production for October which is expected to rise by 0.4% after 0.2% and Capacity Utilization to rise to 77.7% after 77.4%.

Thursday November 17:

The U.S. data will start at 13:30 GMT with the housing starts for October which is expected to drop to 610 thousand from 658 thousand and Building Permits on the other hand to rise to 600 thousand from 594 thousand.

At the same time we have the weekly jobless claims for the week ending November 11 after last week they unexpectedly declined to 390 thousand.

The data will end with the Philadelphia Fed Index for November at 15:00 GMT which is expected to improve to 10.0 from 8.7.

Friday November 18:

Germany will end the week with the Producer Price Index for October at 07:00 GMT which is expected with 0.1% rise after 0.3% and on the year to slow to 5.3% from 5.5%.

The euro area will release the construction output for September at 10:00 GMT after it recorded 0.2% rise in August.

The United States will end the week at 15:00 GMT with the Leading Indicators for October which are expected to improve to 0.5% from 0.2%.

Originally posted here