By FX Empire.com
The EUR/USD ended a strongly bullish week on the supported from the EU and improved hopes that the leaders are moving forward to contain the crisis.
We can see somewhat improved sentiment in the market and slightly eased fears on the pledges from the euro area to contain the debt crisis by supporting Greece and recapitalizing banks which eased the jitters over a financial system collapse in Europeand spreading to the global financial system.
This improvement was mirrored in the roadmap presented by EC President Jose Barroso and the pledges from Germany and France to present a plan as soon as the October 23 summit and ahead of the November G20 Summit.
Nevertheless, the market did not still see any concrete plans to the recapitalization or to what extent will the private sector participate in easing Greek woes, especially as the market is pricing 50-60% write-downs on Greek bonds much beyond the 21% according to the July agreement.
This week we expect the rationality to start to return to the market and we might see more confined relief as jitters rise ahead of the coming summit especially if no plans emerge.
We see the chances for heavy EUR/USD volatility with the focus shifting to economic data and the heavy inflation, housing and manufacturing figures from theUnited Statesthat will confirm the sluggish pace of growth while corporate earnings also add to the pressure on the market.
The Chinese growth figures are also to add to the volatility in the market and the regained focus on growth this week and how officials should move to kick start a stalling recovery amid the debt problems inEurope.
Other news from the euro area and the U.S. economy to affect the pair this week:
Monday October 17:
TheUnited Stateswill start the week at 12:30 GMT with the Empire Manufacturing index for October which is expected with improvement to -4.0 from -8.82.
At 13:15 GMT the Industrial Production for September is due and expected to hold on the month with 0.2% gain and capacity utilization to move slightly higher to 77.5% from 77.4%.
Tuesday October 18:
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.
Wednesday October 19:
The euro area will release the August Current Account at 08:00 GMT where the deficit might have narrowed from -12.9 billion in seasonally adjusted terms after the trade deficit narrowed.
At 09:00 GMT the Construction Output for August is due after it rose 1.4% in July and was higher 1.2% on the year.
TheUnited Statescontinues with the inflation data at 12:30 GMT with the Consumer Price Index for September. The CPI is expected to rise 0.3% on the month after 0.4% gain and on the year to hold at 3.8%, while Core CPI is expected to hold the monthly gain at 0.2% and on the year to rise slightly to 2.1% from 2.0%.
The data continues with the Housing Starts for September also at 12:30 GMT and expected to rise to 594 thousand from 571 thousand. Building Permits on the other end are expected with 2.4% drop to 610 thousand from 620 thousand.
The final release for the United States on Wednesday will be the Fed’s Beige Book at 18:00 GMT.
Thursday October 20:
At 06:00 GMT Germany will report the Producer Price Index for September which is expected with 0.3% rebound on the month following the drop of 0.3% and on the year to hold at 5.5%.
The advanced consumer confidence for October is due at 14:00 GMT and expected to drop further to -20.0 from -19.1 in September.
The United States will start with the weekly jobless claims for the week ending October 14 at 12:30 GMT after last week they rose by 404 thousand.
At 14:00 GMT the September Leading Indicators are expected with a slightly drop to 0.2% from 0.3%. The Philadelphia Fed Index for October is expected to improve to -0.9 from -17.5 and finally Existing Home Sales for September are expected with 2.5% drop to 4.91 million from 5.03 million.
Friday October 21:
Germany will end the week with more confidence figures with the IFO Survey for October at 08:00 GMT; the Business Climate Indicator is expected to drop to 106.5 from 107.5 the Current Assessment index to fall to 116.9 from 117.9 and the Expectations index to drop to 97.0 from 98.0.
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