The euro was one of the only currencies to gain against the US dollar on Monday, but only after EUR/USD bounced from rising trendline support at 1.2705 while EUR/GBP recovered from Fibonacci support near 0.8800. There was little in the way of news released from the Euro-zone, but looking ahead to Tuesday morning’s reports, producer prices in the Euro-zone are forecasted to have fallen for the fourth straight month at a rate of 1.2 percent during December, while the annual rate could slow to 2.1 percent. We've already seen Eurostat's estimates for January CPI plunge to a nearly 10-year low of 1.1 percent, and if this upcoming release of input costs fall more than anticipated, the markets may shift to price in a rate cut by the European Central Bank on Thursday and thus lead the euro lower. As it stands, Credit Suisse overnight index swaps are pricing in a 77 percent chance of a 25bp cut, but based on comments by ECB President Jean-Claude Trichet following their last meeting, a Bloomberg News poll shows that economists expect that the ECB will hold off until March before considering reducing rate again.
Related Article: Euro Weekly Trading Forecast
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