Forexpros – The euro rose against the U.S. dollar on Friday, paring some of the week’s losses after European leaders agreed on a plan to deepen fiscal integration in the euro zone, although investors remained concerned over the handling of the region’s debt crisis.
EUR/USD hit 1.3280 on Friday, the pair’s lowest since November 30; the pair subsequently consolidated at 1.3384 by close of trade on Friday, retreating 0.27% over the week.
The pair is likely to find support at 1.3258, the low of November 30 and resistance at 1.3485, the high of December 5.
European leaders agreed to increase the financial backstops to countries with debt problems by channeling EUR200 billion of funds to the International Monetary Fund. However, they postponed decision on increasing the capacity of the European Stability Mechanism until March.
U.K. Prime Minister David Cameron vetoed changes to the EU treaty after failing to secure concessions, meaning new fiscal rules will have to operate as an intergovernmental agreement.
Meanwhile, investors remained cautious amid uncertainty over whether the European Central Bank will now play a bigger role in stabilizing the region’s bond market.
Earlier Friday, official data showed that the U.S. trade deficit narrowed to USD43.5 billion in November, in line with expectations, from a deficit of USD44.2 billion the previous month.
In a separate report, the University of Michigan said that its index of consumer sentiment rose more-than-expected to 67.7 in November, from 64.1 the previous month.
Market sentiment was hit on Thursday, as European Central Bank President Mario Draghi quashed expectations that the central bank would step up its bond purchasing program once a political solution to the debt crisis reached.
Draghi’s comments came after ECB cut its benchmark interest rate by 0.25%, bringing rates to a record low of 1%.
In the U.S., the Department of Labor said that the number of people who filed for unemployment assistance in the U.S. last week fell to the lowest level since late February, tumbling to 381,000 after a reading at 404,000 the previous week.
In the week ahead, investors will be keeping a close eye on the borrowing costs of troubled euro zone states, as a rise in borrowing costs could prompt a rating cut after Standard & Poor’s warned that it may carry out a mass downgrade of 15 euro zone members, including France, Italy and Spain.
Italy and Spain are both set to auction government bonds in the coming week.
Markets will also be closely watching the Federal Reserve’s policy setting meeting on Tuesday, as concerns over the impact of the euro zone’s financial crisis on global growth continue to weigh.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets.
Monday, December 12
The U.S. is to publish official data on the federal budget balance.
Tuesday, December 13
In the euro zone, the ZEW Centre for Economic Research is to publish a report on German economic sentiment, a leading indicator of economic health.
Later Tuesday, the U.S. is to publish official data on retail sales, the foremost indicator of consumer spending, which accounts for the majority of overall economic activity. In addition, the Federal Reserve is to announce its federal funds rate.
Wednesday, December 14
The euro zone is to release official data on industrial production, a leading indicator of economic health.
The U.S. is to produce official data on import prices and crude oil stockpiles.
Also Wednesday, the Organization of Petroleum Exporting Countries is to meet to discuss a range of issues regarding energy markets, including oil production levels.
Thursday, December 15
The euro zone is to publish preliminary data on manufacturing and service sector activity, leading indicators of economic health. Germany and France are also to release individual reports. The single currency bloc is also to publish official data on consumer price inflation and employment change.
Also Thursday, the ECB is to publish its monthly bulletin, while ECB head Mario Draghi is to speak; his comments will be closely watched for any clues to the possible future direction of monetary policy.
The U.S. is to release a flurry of economic data, including the weekly report on initial jobless claims and data on producer price inflation. The U.S. is also to release official data on industrial production, capacity utilization, the current account, TIC long term purchases and manufacturing activity in New York and Philadelphia regions.
Friday, December 16
In the euro zone, ECB head Mario Draghi is to speak; his comments will be closely watched for any clues to the possible future direction of monetary policy.
The U.S. is to round up the week with official data on consumer price inflation, which accounts for the majority of overall inflation.
Forexpros
