Midweek Summary: March 12-16

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By: Nikoletta Panteli of easy-forex

EUR/USD

The Euro strengthened at the start of the new week against the US Dollar after Greece’s successful debt swap deal. The pair opened at 1.3120 and rose as high as 1.3191 but the relief did not last long as fears the European debt crisis could worsen again put the single currency under pressure. On Tuesday the pair slid as low as 1.3081 while market players are concerned that other peripheral countries like Spain and Portugal may suffer a similar situation. While the eurozone economy appears to be sliding back into recession, the US economy shows signs of economic recovery. All eyes turn to today’s monetary policy meeting by the Federal Reserve where markets anticipate that the recent evidence of a US economic recovery may spur the Fed to hold off from another round of quantitative easing. The European leaders met at an EU summit this week where they signed off a second Greek bailout package, worth 130 billion euro but a formal approval will happen on Wednesday. The European Central Bank met last week to decide on the monetary policy where rates were kept unchanged at 1%. Investors now focus on the Consumer Price Index where we expect a 0.5% gain in February. In addition, eurozone Industrial Production, Trade Balance and employment change will also be released this week.

GBP/USD

The British Pound depreciated versus the US Dollar on the first day of the week, weighing on concerns over developments on Greece. The stronger dollar in combination with a negative sentiment in the market pushed the sterling as low as 1.5602, from 1.5695, a decline of 0.6%. Better than expected US retail sales figures supported the dollar and pushed the sterling lower on speculation the Fed may sound less dovish in the policy meeting accompanying statement. Focus turns to the UK Trade Balance data which is expected to widen further.

EUR/JPY

The single currency rose to a two-week high versus the Japanese Yen on Tuesday after the Bank of Japan interest rate decision. BoJ decided to keep rates on hold and the asset purchasing program unchanged which supported the yen. Last month, BoJ surprised the markets after a decision to ease its monetary policy through asset purchases in order to support the economy. It was also said that the central bank will remain ready to act in the currency markets in order to defend its currency as a strong yen has a negative effect on the country’s exports. The pair opened at 108.05 this week and rose as high as 108.72 recovering from a low at 107.51.

EUR/GBP

The single currency jumped against the British Pound on Monday rising as high as 0.8423 after opening at 0.8369. The euro got a boost after the People’s Bank of China confirmed its intention to continue to invest in the eurozone. Hopes following the successful Greek debt restructuring failed to support the single currency which later dipped to 0.8353 on Tuesday. Eyes now turn to Spain as the country risks of missing its deficit target this year.

USD/CHF

The greenback was stronger against the Swiss Franc as the week commenced. On Monday, the pair opened at 0.9191 and fell as low as 0.9140 but later recovered at 0.9240. Switzerland’s Producer Price Index data showed an increase of 0.8%, Speculators argue that the Swiss National Bank may step in the currency market to stop the franc from rising further. The SNB has set a floor at 1.20 for the euro versus the Swiss Franc, and the pair is trading close to that. No major economic data is expected this week from Switzerland.

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