With the US markets closed today for the Martin Luther King holiday, we will see a muted start to the trading week for fundamental news on the euro to dollar pair.  The only relevant news today is a minor announcement from Italy where the trade balance figures came in marginally worse than expected at -0.79bn against a forecast of -0.73bn and as expected the news had little impact on the euro.   With no other dollar news later in the day expect the euro to dollar to trade in a desultory way for the remainder of the day.

Meanwhile Tuesday sees the currency trading week kick off with the important German ZEW numbers which are forecast at 49.8, marginally lower than previous which came in at 50.4.  The ZEW is generally considered to be a leading indicator and is one of the most important “sentiment” indices and is based on a survey of around 350 German institutional investors who are asked to rate the economic outlook for Germany (Europe’s largest economy) for the next six months.  If the actual is better than forecast then this is generally favourable for the euro.

The US data due for release is issued by the Treasury Department and is the TIC long term purchases which are forecast to come in at 30.3bn, well above last month’s figure of 20.7bn.  The figures represent the difference in value between foreign long term securities purchased by US citizens and those purchased by foreigners and which provides the market with an indication of overseas demand for the US dollar. Once again if the actual is better than forecast then this should be good news for the US dollar.

Wednesday’s highlights for Europe come once again from Germany with the PPI data forecast this time at 0.2%, an increase over last month of 0.1%.  The figure represents the change in the price of goods sold by manufacturers and is generally considered a leading indicator of consumer inflation which in turn will affect interest rates.   The key fundamental news for the US is also the PPI data which is expected at 0.1%, significantly lower than last time at 1.8%.

Whilst Thursday sees a raft of fundamental news for Europe, this is all second tier data and covers flash manufacturing and services for both Germany and France coupled with the ECB monthly bulletin.  Meanwhile in the US we have two tier one releases: the first being the weekly unemployment claims which are forecast at 441k against a previous of 444k and closely followed by the Philly Manufacturing Index forecast at 18.2 against a previous of 20.4.  The latter is another diffusion index based on a survey of 250 manufacturers in the Philadelphia area who are asked to rate the current business climate and if the actual is better than forecast then again this should be favourable for the US dollar.

The end of the week closes with a very quiet day of fundamental news for the euro to dollar, with nothing in the US scheduled for release and only a second tier announcement in Europe for industrial new orders.

Given the somewhat sparse level of fundamental news for the euro to dollar, currency markets will be watching this week’s raft of 4th quarter earnings for clues as to the state of the economic recovery (or otherwise) and and their impact on the market’s appetite for risk.

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