Last week, EUR/USD fell for a fifth successive week, making this the longest losing streak the currency has experienced in almost two years. This decline was a result of fears that the worst of the debt crisis in Europe is yet to come and data which indicated that the U.S. labour market is strengthening; Friday saw U.S. payrolls rise 200,000 in December, bringing the unemployment rate in the US to 8.5%.
The Euro-zone sovereign debt and banking crisis will remain a central focus for the FX market in the week ahead, with French president Sarkozy and German chancellor Merkel meeting later today in Berlin for the first time in 2012, with the intent of designing a master plan to rescue the euro over the next few months.
In the week ahead, key risk events for Europe include the ECB meeting on Thursday, however the market doesn't expect the central bank to lower rates until after the February or March meeting. On Thursday and Friday we will see both Italy and Spain going to the market to sell bonds; Spain will try and auction off 3-year and 4-year bonds on Thursday, while Italy will be auctioning 3-year bonds on Friday.
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Institutions named in this article:
ECB: European Central Bank- The institution of the European Union (EU) which administers the monetary policy of the 17 EU Eurozone member states.