Euro Maintains Momentum on Speculations ECB Will Pause Easing in Jan

Market Overview | Written by ActionForex.com | Dec 11 08 11:01 GMT |

Euro maintains upside momentum and rises further to as high as 1.3172 against the greenback on speculation that ECB would pause rate cut in Jan. In the monthly bulletin published today, ECB expects 'global economic weakness and very sluggish domestic demand are seen as persisting in the next few quarters' but 'a subsequent recovery should then gradually take place, supported by the fall in commodity prices and assuming that the external environment improves and the financial tensions weaken'. Moreover, there are chances that the central bank will pause rate cut at the January meeting. Executive Board member Jurgen Stark said that the ECB may not need to cut policy rate next month as the committee may want to wait for some new information for assessing price stability which is not available until February and March. Following Euro, Swiss Franc extends strength against the greenback too. SNB announced to cut the 3-month Libor by 50 bps to 0.5%, the lowest in 4 years. From the accompanying statement, it’s likely the more easing policies (other than rate cut) will come in 2009. More on SNB here. In the UK, David Blanchflower, the first Bank of England official to predict the recession, is going to step down in May. CBI distribution trade unexpectedly improved from -38 to -35 in Nov. EUR/GBP retreats mildly from record high of 0.8821. Where there is not confirmation of a top yet, we'd still expect it's around the corner with bearish divergence condition in 4 hours MACD. Australia's employment fell -15 .6K in November, worse than a -15K drop as market expected and growth of 34.3K in October. Unemployment rate rose to 4.4% from 4.3% last month. Later in US session, US jobless claims should have increased 525K, higher than 509K in the previous week. Concerning trade balance, the world's largest economy is anticipated to record a deficit of -$53.5B in October, improved slightly from a deficit of -$56.47B in September. Both export and import price index should have fallen -1.5% and -4.9% respectively in November. On the other hand, Canada is expected to record a trade surplus of CAD 3.45B, the contracted figure was brought by reduction of export to CAD 41.6B from CAD 45.51B and an increase of imports to CAD 38.1B from CAD 38.02B. Canada will also report Oct new housing price index which is expected to have declined 0.1%. Economic Indicators Update GMT Ccy Events Actual Consensus Previous Revised 0:30 AUD Australia Employment Change Nov -15.6K -15.0K 34.3K 0:30 AUD Australia Unemployment rate Nov 4.40% 4.40% 4.30% 8:30 CHF SNB rate decision Q4 0.50% 0.50% 1.00% 9:00 EUR ECB Monthly Bulletin 11:00 GBP U.K. CBI distribution trade Dec -35 -44 -38 13:30 USD U.S. Jobless claims 525.0K 509.0K 13:30 USD U.S. Trade balance (usd) Oct -53.5B -56.47B 13:30 USD U.S. Export price index M/M Nov -1.50% -1.90% 13:30 USD U.S. Import price index M/M Nov -4.90% -4.70% 13:30 CAD Canada Trade balance (cad) Oct 3.45B 4.49B 13:30 CAD Canada Exports Oct 41.6B 45.51B 13:30 CAD Canada Imports Oct 38.1B 38.02B 13:30 CAD Canada New housing price index Oct -0.10% 0.10% 15:35 USD Natural Gas Storage -64B