The pair showed a sharp drop on Wednesday as the sentiment showed bearishness once again after downbeat announcements by Fitch and expectations of slowdown inGermanyby Destatis and after downbeatU.K.trade data.
The pair failed to continue its upside correction as fears from the euro area enhanced demand on the dollar as a refuge.
Fitch said on TuesdayItalyis in the brink of having its credit rating cut. It said also a number of euro area economies, includingFranceandSpain, are under review for a possible downgrade at the end of the current month.
In addition, Fitch predicts the euro area to relapse into a “shallow recession” this year as the severe spending cuts by governments are likely to continue affecting businesses and households’ consumption and confidence.
What added to recession worries is that Destatis said German growth pace eased to 3% growth in 2011 from 3.7% expansion in 2010, while it expects 0.25% growth in the fourth quarter.
The grim announcements overshadowed the strong demand seen at a German auction on Wednesday.
In theU.K., visible trade deficit widened to 8644 million pounds in November compared with the revised deficit of 7868 million pounds, which was -7557 million pounds initially, and median forecasts of -8400 million pounds.
On Thursday, as of 13:30 GMT, the U.S economy will release a lot of fundamentals; retail sales, due at 13:30 GMT, are expected advance 0.2% in Dec. from the prior 0.2% rise.
At the same time, initial jobless claims for the week ended Jan. 7 and continuing claims for the week ended Dec. 31 will be available. At 19:00 GMT, the monthly budget statement for Oct. is predicted to show a deficit of $79.0 billions.
The data is expected to have a significant effect on the pair’s movement due to their high relevance, yet the pair will probably also be affected by the general sentiment which is focusing on the latest developments from the euro area.
Eyes will be withSpainas it plans to sell 5 billion euros of bonds maturing in 2015 and 2016 whileItalywill auction 3-, 5- and 15- year bills in addition to rate decision from the ECB.
Originally posted here
