Investing.com - The euro surged to the highest level since
October 2011 against the U.S. dollar on Friday, with moves
amplified in poor year-end liquidity after European Central Bank
Governing Council member Jens Weidmann warned against keeping
interest rates low.
EUR/USD rallied to 1.3894, the strongest level since October 31,
2011, before pulling back to settle at 1.3745, up 0.4%. For the
week, the pair advanced 0.53%.
The pair is likely to find support at 1.3672, the low from December
26 and resistance at 1.3894, Friday's high.
Trading volumes were thin as many investors already closed books
before the end of the year, reducing liquidity in the market and
increasing volatility, which helped exaggerate market moves.
ECB Governing Council member Weidmann, who also heads the German
Bundesbank, said Friday that keeping interest rates low may
endanger political reforms. He added that low inflation shouldn't
be used to justify loose monetary policy.
"We must take care to raise interest rates again in a timely manner
should inflation pressures build," Weidmann said.
Demand for the greenback remained supported amid expectations of
further stimulus tapering by the Federal Reserve. The U.S. central
bank will start reducing its bond-buying stimulus program by USD10
billion a month in January, amid indications of an improving U.S.
Some market participants believe the Fed will likely reduce its
bond purchases by USD10 billion in each of its next seven meetings
before ending the program in December 2014, as the U.S. recovery
Data on Thursday showed that the number of individuals filing for
initial jobless benefits declined by 42,000 to a seasonally
adjusted 338,000 last week. Analysts were expecting U.S. jobless
claims to fall by 35,000 to 345,000 from the previous week's
revised total of 380,000.
In the week ahead, the U.S. is to publish reports on pending home
sales, consumer confidence and jobless claims, as investors attempt
to gauge the strength of the world's largest economy.
Trading volumes are expected to remain light, with many markets
closed for the New Year's holiday.
Ahead of the coming week, Investing.com has compiled a list of
these and other significant events likely to affect the markets.
Monday, December 30
Italy is to hold an auction of five-and-ten-year government debt.
Meanwhile, the U.S. is to release private sector data on pending
home sales, a leading indicator of economic health.
Tuesday, December 31
Markets in Germany will remain closed for New Year's Eve.
Meanwhile, the U.S. is to produce private sector data on consumer
confidence and house price inflation, as well as a report on
manufacturing activity in the Chicago region.
Wednesday, January 1
Markets in Europe and the U.S. will remain closed for the New
Thursday, January 2
The euro zone is to release revised data on its manufacturing PMI,
while Spain and Italy are also to release individual reports.
Later in the day, the Institute of Supply Management is to release
its manufacturing PMI, while the Labor Department is to release its
weekly report on initial jobless claims. The U.S. is also to
publish data on construction spending.
Friday, January 3
In the euro zone, Spain is to publish data on the change in the
number of people employed.
The U.S. is to round up the week with official data crude oil
stockpiles and natural gas inventories.
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