The pair gained momentum after France and the European Financial Stability Facility were able to access the capital market easily, where both succeeded to obtain cheaper funds on strong demand, which added positivity to the market that European nations are still capable of solving the debt crisis and restoring confidence.
Moreover, markets gained on the resumed Greek debt-talks as some progress was reached in finalizing a deal with the private sector on the percentage haircut and the coupon rate on the Greek bonds. However, the results are set to be provided by the end of this week. The importance of the talks is driven by the International Monetary Fund and European Union which demanded the nation to finish with the deal in order to become eligible to the offered second bailout package.
This week the pair is expected to fluctuate heavily due to the heavy load of fundamentals and events; however, the main focus will be on the performance of the euro-zone manufacturing and services sectors, which are projected to improve in January.
In the United States, the FOMC rate decision and the gross domestic product figures are expected to pull all the attention this week, where investors will track the rate decision and further details on the Fed’s next move; however, the Central Bank is expected not to provide any new stimulus especially with the flow of upbeat fundamentals. In addition, the GDP figures for the fourth quarter are expected at a strong 3.0% expansion compared with the prior 1.8%.
In general, we expect the EUR/USD pair to extend the upside move this week in case the fundamentals came in line or above expectations, as we can see the projected improvement in the manufacturing and services sectors in Europe could provide the pair with more momentum, supported by the U.S. GDP figures and other critical fundamentals.
Finally, despite the expected general trend the pair could fluctuate heavily and move violently due to the heavy load of fundamentals, auctions and events, especially when the time is running out and the European summit is on the doors.
The release of the data this week will be as follow:
Monday January 23:
The euro area will start the week with the advanced estimate for the January consumer confidence at 15:00 GMT and likely to see a slight improvement from the previous -21.1.
Auctions:
10:00 GMT Slovakia sells bills
10:15 GMT Germany sells bills
14:00 GMT France to sells bills
Tuesday January 24:
Germany is set to start the day with the advanced PMI estimate for January at 08:30 GMT where the manufacturing PMI is expected slightly higher at 49.0 from 48.4 and the services a notch higher at 52.5 from 52.4.
The euro area will release the flash January PMI estimates at 09:00 GMT with the Composite Index expected slightly higher at 48.5 from 48.3 as the Manufacturing rises to 47.3 from 46.9 and Services tick slightly higher to 49.0 from 48.8.
At 10:00 GMT the euro area Industrial New Orders Index for November is due and expected with a strong 2.9% drop on the year after 1.6% rise with the decline from the earlier month a steep 2.5% after 1.8% rise.
Auctions:
09:00 GMT Netherlands sells bills
09:30 GMT Spain sells bills
10:00 GMT Malta sells bills
Wednesday January 25:
Germany will take the lead with the IFO Confidence figures at 09:00 GMT for January. The Business Climate index is expected to tick higher to 107.6 from 107.2 while the Current Assessment is expected to move to 117.0 from 116.7, and finally the Expectations index is expected also with improvement to 99.0 from 98.4.
The United States Pending Home Sales are due at 15:00 GMT for the month of December and are expected to remain flat after 7.3% rally the previous month.
At 17:30 GMT the market awaits the FOMC rate decision where the Federal Reserve is expected to keep rates near zero at the 0.25-0.0% range while unlikely to take any new stimulus decisions though still the focus will be on any signal for more easing and support for the economy though still unlikely as the Feds buy time with the flow of good data and signs of stabilization.
Auctions:
10:15 GMT Germany sells bills
Thursday January 26:
Germany will release the GFK Consumer Confidence index for February at 07:00 GMT and expected to remain steady at 5.6.
The United States will start the day at 13:30 GMT with the Durable Goods Orders for December where the index is expected to have eased to 2.0% after 3.8% and excluding transportation expected at 0.9% rising from 0.3%.
Initial jobless claims are due at the same time for the week ending January 21 after they declined last week to 352,000.
Leading Indicators for the month of December will be released at 15:00 GMT and expected to improve to 0.7% after 0.5%.
Also at 15:00 GMT the New Home Sales for December will be released and expected with 1.6% rise to 320 thousand from 315 thousand.
Auctions:
10:00 GMT Italy sells bills
Friday January 27:
The euro area will end the week with the M3 Money Supply for December at 09:00 GMT, where the three month average is expected to slow to 2.3% from 2.5% and on the year to rise to 2.3% after 2.0%.
The United States will end with top notch data where at 13:30 GMT the advanced GDP estimate for the fourth quarter is expected to show a strong 3.0% expansion following 1.8% growth in the third quarter.
Core PCE is expected to slow to 0.9% after 2.1% while Personal Consumption expected with a leap to 2.5% after 1.7%.
The week’s data will end at 14:55 GMT with the University of Michigan Confidence for January which is expected unrevised from the advanced estimate at 74.0.
Auctions:
10:00 GMT Italy sells bills
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