Trade FOREX with FXCM

  • Award-Winning Platform
  • 24/7 Customer Support
  • Trade Directly on Charts
  • Free $50K Practice Account

Resources

Forex: Euro Threatens Range As Italian Bond Yields Exceed 7%

By , Currency Analyst
15 November 2011 14:45 GMT

Talking Points

  • Euro: Maintains Range-Bounce Prices, ECB To Ease Further
  • British Pound: Struggles To Hold Interim Support As Inflation Cools
  • U.S. Dollar: Poised To Give Back Overnight Rally, Fed Rhetoric On Tap

Euro: Maintains Range-Bounce Prices, ECB To Ease Further

The Euro tumbled to an overnight low of 1.3511 even as the 3Q GDP report came in largely in-line with market expectations, but we may see the single currency regain its footing during the North American trade as European policy makers vow to address the sovereign debt crisis once and for all. European Union President Herman van Rompuy encouraged the governments operating under the monetary union ‘to do more’ as the yield tied to Italy’s government debt pushed back above 7%, and went onto say that the euro-area has the ‘means’ to get its house in order while speaking in Brussels.

However, as the political shift in Italy comes under increased scrutiny, the uncertainties surrounding the region may continue to bear down on trader sentiment, and the single currency may trade heavy over the remainder of the week as the fundamental outlook for the region remains weak. Indeed, there are market rumors that the European Central Bank stepped into the bond market and purchased Italian debt in light on the recent developments, and the Governing Council may have little choice but to expand monetary policy further as the region braces for a ‘mild recession.’ According to Credit Suisse overnight index swaps, market participants see a 62 % chance for another 25bp rate cut in December, and speculation for lower borrowing costs is likely to weigh on the exchange rate as investors weigh the prospects for future policy. As the EUR/USD continues to hold above the 50.0% Fibonacci retracement from the 2009 high to the 2010 low around 1.3500, it seems as though the euro-dollar will continue to face range-bound prices in the days ahead, but we are likely to see the pair drift lower in the days ahead as the shift away from risk-taking behavior gathers pace.

British Pound: Struggles To Hold Interim Support As Inflation Cools

The British Pound tumbled to a low of 1.5827 as the headline reading for U.K. inflation slowed more-than-expected, but the sterling should benefit from the rebound in market sentiment as risk trends continue to drive price action in the currency market. However, as the core rate of inflation tops market forecast and expands at the fastest pace since April, the stickiness in consumer prices may lead the Bank of England to soften its dovish tone for monetary policy, and the central bank may endorse a wait-and-see approach as its scheduled to deliver its quarterly inflation report later this week. Indeed, the slowing recovery in Britain may prompt the BoE to curb its economic assessment for the region, and the developments coming out of the central bank is likely to dictate future price action for the sterling as market participants weigh the outlook for monetary policy. However, as the GBP/USD struggles to hold above 1.5890-1.5900, the recent weakness in the British Pound could expose the 38.2% Fib from the 2009 low to high around 1.5680-1.5700, and we are likely to see the sterling face additional headwinds in the days ahead should the BoE talk up speculation for more quantitative easing.

U.S. Dollar: Poised To Give Back Overnight Rally, Fed Rhetoric On Tap

The U.S. dollar advanced against its major counterparts during the overnight session, but the reserve currency may struggle to hold its ground during the North American trade as risk appetite resurfaces. Indeed, the slew of positive developments coming out of the world’s largest economy has helped to prop up market sentiment, and the rise in risk looks poised to gather pace as the U.S. equity market pares the decline from the open. As the economic docket remains light for the remainder of the day, we should see trader sentiment dictate price action throughout the day, but comments from Fed officials may weigh on risk-taking behavior should the central bank talk down speculation for additional monetary support. Indeed, Dallas Fed President Richard Fisher said there’s limited scope for more easing as the economy is ‘poised for growth,’ and the central bank hawk may continue to speak out against another round of quantitative easing as the recovery gradually gathers pace.

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong

To be added to David's e-mail distribution list, send an e-mail with subject line "Distribution List" to dsong@dailyfx.com.

Will the EUR/USD Retrace The Advance From Earlier This Year? Join us in the Forum

Related Articles: Weekly Currency Trading Forecast

FX Upcoming

Currency

GMT

EDT

Release

Expected

Prior

USD

15:00

10:00

Business Inventories (SEP)

0.1%

0.5%

USD

15:05

10:05

Fed's John Williams Speaks on U.S. Economy

--

--

USD

16:00

11:00

Fed's Charles Evans Speaks on U.S. Economy

--

--

USD

17:30

12:30

Fed's Richard Fisher Speaks on Too Big to Fail

--

--

Currency

GMT

Release

Expected

Actual

Comments

AUD

0:30

New Motor Vehicle Sales (MoM) (OCT)

--

1.1%

Rises for the sixth time this year.

AUD

0:30

New Motor Vehicle Sales (YoY) (OCT)

--

4.4%

NZD

2:00

Non Resident Bond Holdings (OCT)

--

61.4%

Lowest since July.

JPY

4:00

Tokyo Condominium Sales (YoY) (OCT)

--

-9.3%

Declines for the fifth time in 2011.

EUR

6:30

French Gross Domestic Product (QoQ) (3Q P)

0.4%

0.4%

Expands for the second time this year.

EUR

6:30

French Gross Domestic Product (YoY) (3Q P)

1.6%

1.6%

EUR

7:00

German GDP s.a. (QoQ) (3Q P)

0.5%

0.5%

Annualized growth slows for the second straight quarter.

EUR

7:00

German GDP n.s.a. (YoY) (3Q P)

2.4%

2.5%

EUR

7:00

German GDP w.d.a. (YoY) (3Q P)

2.5%

2.6%

EUR

7:45

French Non-Farm Payrolls (QoQ) (3Q P)

0.3%

0.0%

Fails to grow for the first time since 4Q 2009.

EUR

7:45

French Wages (QoQ) (3Q P)

--

0.4%

Slowest pace of growth since 4Q 2010.

EUR

9:00

Italian Trade Balance (Total) (euros) (SEP)

--

-1840M

Marks the eighth deficit in 2011.

EUR

9:00

Italian Trade Balance EU (euros) (SEP)

--

-8M

GBP

9:30

Consumer Price Index (MoM) (OCT)

0.2%

0.1%

Headline reading cools, while core rate tops forecast. The stickiness in CPI may limit the BoE’s scope to expand policy further.

GBP

9:30

Consumer Price Index (YoY) (OCT)

5.1%

5.0%

GBP

9:30

Core Consumer Price Index (YoY) (OCT)

3.2%

3.4%

GBP

9:30

Retail Price Index (OCT)

238.3

238.0

GBP

9:30

Retail Price Index (MoM) (OCT)

0.1%

0.0%

GBP

9:30

Retail Price Index (YoY) (OCT)

5.5%

5.4%

GBP

9:30

Retail Price Index Ex Mort Int.Payments (YoY) (OCT)

5.7%

5.6%

EUR

10:00

Euro-Zone GDP s.a. (QoQ) (3Q A)

0.2%

0.2%

Despite the in-line print, would need to see stronger growth to avert a recession.

EUR

10:00

Euro-Zone GDP s.a. (YoY) (3Q A)

1.4%

1.4%

EUR

10:00

German ZEW Survey (Current Situation) (NOV)

32.0

34.2

Weakens for the ninth consecutive month.

EUR

10:00

German ZEW Survey (Economic Sentiment) (NOV)

-52.5

-55.2

EUR

10:00

Euro-Zone ZEW Survey (Economic Sentiment) (NOV)

-55.3

-59.1

Lowest reading since October 2008.

EUR

10:00

Euro-Zone Trade Balance s.a. (euros) (SEP)

-1.5B

2.1B

First surplus since October 2010.

EUR

10:00

Euro-Zone Trade Balance (euros) (SEP)

2.0B

2.9B

CAD

13:30

Manufacturing Shipments (MoM) (SEP)

1.2%

2.6%

Rises for the third month.

USD

13:30

Producer Price Index (MoM) (OCT)

-0.1%

-0.3%

Slowest pace of growth since March.

USD

13:30

Producer Price Index (YoY) (OCT)

6.3%

5.9%

USD

13:30

PPI Ex Food & Energy (MoM) (OCT)

0.1%

0.0%

USD

13:30

PPI Ex Food & Energy (YoY) (OCT)

2.8%

2.8%

USD

13:30

Advance Retail Sales (OCT)

0.3%

0.5%

Increased for the fifth consecutive month.

USD

13:30

Advance Retail Sales Less Autos (OCT)

0.2%

0.6%

USD

13:30

Advance Retail Sales Less Auto & Gas (OCT)

0.2%

0.7%

USD

13:30

Empire Manufacturing (NOV)

-2.00

0.61

First positive print since May.

provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from

15 November 2011 14:45 GMT