Busy week for the Euro, which way is it likely to go?
Today we have seen the Euro post strong gains against the pound and hold steady against the US dollar. What has caused the Euro resurgence this afternoon? Increased risk appetite I feel is still causing a slight move in favour of riskier currencies when compared to the US dollar and this is causing a move towards the Euro. An increase in demand for the Euro has lead to short term Euro strength purely as demand increases so to does the price. I feel the Euro may well continue to hold strong against the US dollar in the short term as the market has expectations for further quantitative easing in the US in the coming months. This may well continue to weigh heavily against the dollar and this may lead to subsequent further short term boosts in demand for the Euro and I feel a move back toward 1.34 likely for EUR/USD and 1.19 for GBP/EUR.
What data to keep an eye on this week?
Tomorrow morning we have EU retail sales figures and German Factory orders at 10:00 and 11:00 respectively. Both data sets will give the market clues as to the general performance within the EU as a whole and Europe’s largest economy Germany. EU retail sales are expected to pose a small decline and may therefore cause a small fall in Euro value following the release. Also this week we have industrial production figures from Germany at 11:00 on Thursday – again expected to show a decline month on month putting pressure on the Euro. The main data sets for this week for anyone with a GBP/EUR interest will be the ECB interest rate decision tomorrow at 12:45 (brought forward a day because of a European Bank holiday on Thursday and Friday) and the Bank of England interest rate decision on Thursday at 12:00. Both central banks are expected to keep rates on hold, however keep an eye on any further talk of quantitative easing from the UK.
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