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Forex: Markets Prepare for a Week of Notable Event Risks

Forex: Markets Prepare for a Week of Notable Event Risks

2011-02-28 13:30:00
Michael Wright, Currency Analyst
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Talking Points

  • Japanese Yen: Losses Ground Against Most Major Currencies
  • British Pound: Focus Shifts to Nationwide House Prices
  • Euro: Euro-Zone CPI Misses Expectations
  • Canadian Dollar:Pending Home Sales on Tap

The EURUSD pared Friday’s decline to reach an overnight high of 1.3847; however, upside risks remain capped by 1.3850 and failure to break above this level could lead the pair back towards the 1.36 area. Indeed, risk appetite looked to have regained its footing during the European trade after low yielding currencies advanced during the Asia trade amid tensions in the Middle East escalating. As of late, the recent uproar in protests in the Middle East/North Africa has spread to Oman. As a result, currency traders should not rule out a shift in sentiment over the upcoming sessions as uncertainty regarding the global recovery remains.

Taking a look at the economic docket overnight, consumer prices in the 17 member euro area rose an annualized 2.3 percent in January after climbing 2.2 percent the month prior amid expectations of 2.4 percent, while the core reading from a year ago advanced 1.1 percent from a revised 1.0 percent in December. At the same time, the breakdown of the report showed that clothing was the key drag on the headline reading as prices dropped 13.3 percent from a month ago. Also worth noting is the fact that Ireland posted the lowest annual rate at 0.2 percent, while the reading in Greece came in at an impressive 4.9 percent. Following the better than expected inflation reading in January, traders will now shift their focus to the CPI estimate for February, which will be released tomorrow at 10:00 GMT. As price concerns have served as the primary driver behind the euro, a better than predicated report could fuel the momentum in the single currency. Going forward, inflation pressures are expected to be short-lived due to the fact that governments in the bloc implement tough austerity in order to battle their high budget debts. Thus, traders already in long positions should keep stops close as a reverse in course is in the horizon. All in all, the single currency may continue to witness advances in the short term, but the overall trend remains tilted to the downside. Not to overlook, the ECB rate decision will cross the wires on March 3rd at 12:45 GMT.

Meanwhile, the GBPUSD halted its two day decline and reached an intraday high of 1.6241 on the back of the rise in risk appetite. With a relatively quiet economic docket in the U.K., focus will shift to the slew of releases coming out from the region tomorrow. On tap will be the nationwide house prices, PMI manufacturing, and the M4 money supply. House prices in particular will be placed in the spotlight because of the lack of demand for properties in the U.K. in light of tight credit conditions, high unemployment, subdued wage growth, and uncertainty surrounding the economic outlook. Therefore, a dismal housing report could lead the pound to pare Monday’s gains head back towards the 1.60 area.

The loonie is mixed amongst its major counterparts ahead of Canada’s economic activity report for the month of December. Ahead of the release, economists are expecting GDP to expand an annualized 2.8 percent during the month, and 3.0 percent in the fourth quarter. Join me to cover this report live!

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

Related Articles: Weekly Currency Trading Forecast

To discuss this report contact Michael Wright, Currency Analyst: instructor@dailyfx.comFX Upcoming

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