Weekly Summary 6-8 February 2012

By Nikolas Xenofontos from easy-forex

EUR/USD

The Euro started the week with a gap lower against the US dollar. The single currency managed to somewhat fade the gap, although no meaningful developments on the Greek negotiations crisis emerged. Tuesday saw the pair appreciating to 2012 highs after optimism concerning possible private sector involvement and the request for austerity measures from the troika flooded the markets. Later in the day, Federal Reserve Chairman Bernanke, testified before the Senate Budget Committee, choosing to defend the Fed’s decision to announce low interest rates up to 2014 and called for decisive actions to lower the unemployment rate. Market participants are now drawing scenarios on the European Central Bank announcement regarding its lending rate due on Thursday at 12:45 GMT. The press conference that will follow will be closely monitored for hints on further actions.

GBP/USD

This year is evolving into a very interesting one for the British pound versus the US dollar. The pair was relatively unobserved by investors over the past few months but its appreciation in 2012 has forced renewed attention to be drawn to it. The cable started the week soft but soon recorded three-month highs at 1.5928. The market is bracing for Thursday’s Bank of England rate announcement and asset purchasing decision. Consensus is that the Monetary Policy Committee will leave the lending rate untouched but will announce a further £50 billion of asset purchases.

EUR/JPY

The single currency against the Japanese Yen commenced this week shy, recording losses on Monday. However on Tuesday, the Euro produced a stellar performance that only stalled at the resistance level of 102.00. This was broken through on Wednesday, when the pair recorded a multi-week high at 102.45. The rate decision by the European Central Bank is expected to heavily influence the price progression, given a relatively lackluster economic calendar from Japan.

EUR/GBP

This is a particularly challenging pair as both currencies are showing strong appetite to appreciate. The Euro depreciated on Monday against the British pound, but on Tuesday it outperformed the sterling. The Bank of England is expected to announce its rate and asset purchasing decision on Thursday, one hour ahead of the European Central Bank announcement for its respective rate. This timing difference is expected to produce great swings in the pair.

USD/CHF

The Swiss franc has established a long term appreciating trend against the weakening US dollar. However, as the franc is approaching the 1.20 floor set against the Euro in September of 2011 by the Swiss National Bank, market participants are positioning themselves accordingly. On Friday, the Swiss economy inflation figures will be released following three months of deflationary pressures. The question remains whether the SNB will defend or raise the floor in case of further falling prices, taking in consideration that the mastermind behind the intervention, ex-head of SNB Hildebrand resigned following his wife’s trading scandal.