By FX Empire.com
The EUR/USD pair ended a strongly bullish week, supported by the European summit’s cheerful results, which eased jitters and rising debt woes and could support the return of confidence to the market, where European leaders have finally found common grounds and provided markets with a comprehensive plan to contain the debt crisis and prevent the contagion from spreading into larger economies.
The sentiment improved in the market and optimism was seen after leaders agreed on 50% haircut on Greek bonds, and expanded the firepower of the European Financial Stability Facility to one trillion euros. Leaders have also agreed to increase the core capital requirements for banks to 9% by mid 2012 in attempts to strengthen the banking sector and secure European banks from the debt crisis.
This week, we expect volatility and heavy fluctuations to dominate the markets and the EUR/USD pair precisely, especially after the strong rally, awaiting heavy fundamentals from Europe and the world’s largest economy with the European Central Bank rate decision, the FOMC rate decision, the U.S. jobs report and finally the G20 leaders’ two-day meeting in France on November 3 and 4.
This week, all eyes will be focused on the European Central Bank and the Federal Reserve, awaiting the steps and actions to be taken by policy makers to support growth and revive recovery, with expectations that both of the central banks will leave rates unchanged, especially when the U.S. economy grew 2.5% in the third quarter, while the European leaders started to find solutions to overcome the debt crisis and support the economy.
We recommend caution despite the optimism seen during the past week, where further details on the procedures taken by European leaders are required which remains a missing link for the market, along with implementing the measures which is also not set yet…
Other news from the euro area and the U.S. economy to affect the pair this week:
Monday October 31:
The euro zone will starts the week at 10:00 GMT with the consumer price index annual estimate for October, which is expected to decline to 2.8% from 3.0%.
The euro zone will also release the unemployment rate at 10:00 GMT, with expectations that unemployment lingered at 10% in September.
The United States will join the session with the Chicago purchasing manager at 13:45 GMT, with expectations that the indicator could have retreated to 59.0 from 60.4 in October.
Tuesday November 1:
The United States will start the day at 14:00 GMT with the construction spending figures for September, with expectations that the index will expand by 0.3% from the previous 1.4% expansion.
The ISM manufacturing will also be released at 14:00 GMT, where the indicator is expected to show improvement to 52.3 from 51.6 in October.
Wednesday November 2:
Germany will start the session at 08:55 GMT with the unemployment figures for October, where the unemployment change gauge is predicted to show drop of 10 thousands from the previous 26 thousands. In addition, the unemployment rate is expected unchanged at 6.9%.
At 08:55 GMT Germany will also release the PMI manufacturing index final reading for October with expectations for unrevised index of 48.9.
At 09:00 GMT the euro zone will release the PMI manufacturing index final reading for October, where the index is expected to linger at 47.3.
The United States will join the session at 12:15 GMT with the ADP employment change for October, as employment is expected to increase by 101 thousand jobs from 91 thousand.
At 16:30 GMT theUnited Stateswill release the FOMC rate decision, with expectations for a steady rate of 0.25%.
At 18:15 GMT, the Fed’s Chairman Ben Bernanke will speak at a Fed Conference to discuss the latest projections and outlook for the U.S. economy.
Thursday November 3:
The United States will start the day at 12:30 GMT with the nonfarm productivity for the third quarter in a preliminary reading, which is expected to expand by 2.5% from the prior drop of 0.7%. In addition, the unit labor costs for the same period is expected to drop by 0.4% from the previous expansion of 3.3%.
The United States will also provide markets with the initial jobless claims (October 28), which was 402 thousands in last week.
At 12:45 GMT the European Central Bank will announce interest rates, which is expected unchanged at 1.50%.
At 14:00 GMT the United States will release the ISM non-manufacturing composite for October, which could have improved to 54.0 from 53.0.
Moreover, the United States will release the factory orders index for September, with expectations for 0.1% further drop from the previous 0.2%.
Friday November 4:
Germany will start the day at 07:55 GMT with the final reading of the PMI services indicator for October, where the indicator is expected to linger at 52.1.
The euro area will join the session at 09:00 GMT with the final reading of the PMI composite and service for October, where the composite indicator previous reading was 47.2, while the PMI services is projected unchanged at 47.2.
At 10:00 GMT the euro zone will provide the monthly and annual PPI indexes for September, with expectations that the monthly index could have expanded by0.3% from the previous drop of 0.1%, while the annual index is expected lower at 5.8% from 5.9%.
At 11:00 GMT Germany will release the Factory orders index for September, where the annual non-seasonally adjusted index is expected to improve by 7.9% from 3.9%, while the seasonally adjusted monthly index is predicted steady from a 1.4% previous drop.
At 12:30 GMT the United States will join the session with the monthly jobs report for October, where the change in nonfarm payrolls is expected at 100 thousand new jobs from 103 thousands in September. In addition, the unemployment rate is expected unchanged at 9.1%.
See what are the upcoming financial event on the FX Empire Economic Calendar now.
