Forexpros – The euro ended the week sharply higher against the U.S. dollar on Friday, as sentiment improved amid hopes of progress in tackling the debt crisis in the euro zone although uncertainty over Greece’s financial troubles persisted.
EUR/USD hit 1.3485 on Friday, the pair’s highest since December 5; the pair subsequently consolidated at 1.3446 by close of trade on Friday, climbing 1.98% over the week.
The pair is likely to find support at 1.3306, the low of November 30 and resistance at 1.3613, the high of November 18.
The euro found support on Friday after Greece launched a bond-swap offer to private-sector creditors, formally inviting them to exchange their holdings of government debt for new securities.
Investor confidence was also boosted after an auction of Italian government debt saw short-term borrowing costs fall, reassuring investors that the threat of contagion from Greece has abated.
Meanwhile, markets were eyeing the European Central Bank as it is scheduled to launch a second liquidity operation next week, offering unlimited three-year loans to European lenders, after the bank carried out a similar successful operation in December.
Risk appetite was also boosted by positive U.S. data. A report by the University of Michigan on Friday showed that its index consumer sentiment rose to 75.3 this month from 75 in January.
On Thursday, the U.S. Department of Labor said that the number of individuals filing for initial jobless benefits in the week ending February 18 held steady at 351,000, the fewest since March 2008.
Earlier in the day, German research institute Ifo said its Business Climate Index rose to a seasonally adjusted 109.6 in February from a reading of 108.3 the previous month, surpassing expectations for an increase to 108.8.
The euro’s gains were limited however after the European Commission’s forecast for economic growth showed that the euro zone’s economy would contract by 0.3% in the first quarter after dropping by the same amount in the last quarter of 2011. Two consecutive quarters of contraction signal a recession.
In the coming week, markets will be watching developments in the euro zone, with investors eyeing the uptake on Wednesday’s refinancing operation by the ECB, as well as the outcome of votes in Finland and Germany on Greece’s bailout.
Investors will also be focusing on Wednesday’s U.S. data on fourth quarter economic growth, in order to gauge the strength of the country’s economic recovery.
Ahead of the coming week, Forexpros has compiled a list of these and other significant events likely to affect the markets.
Monday, February 27
In the euro zone, the ECB is to release a report on its M3 money supply, which is the change in the total quantity of domestic currency in circulation and deposited in banks. Meanwhile, Germany’s lower house of parliament is to hold an extraordinary session to vote on Greece’s bailout.
Later in the day, the U.S. is to publish industry data on pending home sales, a leading indicator of economic health.
Tuesday, February 28
In the euro zone, market research group Gfk is to produce a report on German consumer climate. Germany is also to release official data on consumer price inflation, which accounts for a majority of overall inflation.
Later Tuesday, the U.S. is to produce official data on durable goods orders, a leading indicator of production, followed by industry data on house price inflation and consumer confidence.
Wednesday, February 29
The euro zone is to produce official data on French consumer spending and German unemployment change, followed by a report on consumer price inflation in the single currency bloc. Elsewhere, Finland’s parliament is to vote on Greece’s bailout, while the ECB is to launch its second refinancing operation.
The U.S. is to release a preliminary report on fourth-quarter GDP, the broadest measure of economic activity and the primary gauge of the economy’s health. The country is also to report on manufacturing activity in the Chicago area.
Also Wednesday, Federal Reserve Chairman Ben Bernanke is due to testify on the semi-annual monetary policy report before the House Financial Services Committee in Washington.
Thursday, March 1
In the euro zone, final data is to be released on manufacturing activity, followed by a preliminary estimate of consumer price inflation and an official report on the unemployment rate. European Union leaders are to hold the first day of a two day summit meeting in Brussels.
The U.S. is to release government data on unemployment claims as well as personal consumption expenditures and personal spending.
Meanwhile, the Institute for Supply Management is to produce a report on manufacturing activity. In addition, Fed Chairman Bernanke is due to testify for a second day before the Senate Banking Committee.
Friday, March 2
In the euro zone, official data is to be published on German retail sales, while EU leaders are to hold a second day of meeting in Brussels.
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