- AUD - RBA Monetary Policy Meeting Minutes (00:30)
- JPY - BoJ Statement of Monetary Policy (Tentative)
Last week, the fundamentals of the US economy appeared to be improving and this contributed to the strengthening of the US dollar against major currencies. Friday, the Conference Board Institute said that its leading indicator rose 1.1% in November, a sign that business activity is seen accelerating. In addition, the tax cut deal approved by the Congress received a warm reception from market participants, as it is expected to boost consumers' savings and their propensity to spend in 2011. Looking forward, the USD exchange rate should reflect the developments of the euro-debt crisis, as ongoing European difficulties have increased demand for safety assets.
EUR
Over the week, the credit rating agencies have exercised strong bearish pressures on the euro. Friday, Moody's Investor Service placed Greece’s rating on review for a possible downgrade and reduced the sovereign rating of Ireland by five notches from Aa2 to Baa1. Overall, this increased fears surrounding European sovereign debt and relegated all other news to the background. In particular, it is worth noting that the German Ifo Business Climate continued to advance in December and showed a significant improvement in confidence among retailers. However, investors seem to favor short term bets in this unstable environment. This results in non-directional trading affecting the euro, which has moved back to its $1.3200 support after failing to hold above the $1.3350 level.
EURUSD Support/Resistance: 1.3085/1.3260
GBP
The downgrade of Ireland has hurt the UK financial sector, and by extension the pound sterling which retreated to its 200-day moving average of $1.5500. British banks (like Lloyds and Royal Bank of Scotland) have indicated that they would have to adjust their year-end balance sheet by passing provisions to depreciate their Irish assets. This could further hamper their ability to lend and delay the recovery of the housing market. Also, negative rumors have that GDP growth in Q2 (+1.2%) could be revised downwardly by the Office for National Statistics in its Wednesday’s release. Ahead of this announcement, upside potential of the pound could be limited, with technical resistance seen at $1.5650.
GBPUSD Support/Resistance: 1.5420 - 1.5450/ 1.5610 - 1.5650
EURGBP Support/Resistance: 0.8450/0.8530
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