Weekly Market Review: Euro continues to weaken against the Dollar

The volatile trading between the Euro and the U.S. dollar, due to speculation of monetary measures enacted by the ECB, morphed into rather muted trading early last week. It started with the Euro being left battered and bruised from Draghi’s dispersion of dovish remarks, and trading at 1.375 Dollar to the Euro, a level unseen since the beginning of April. The weakening of the Euro was re-ignited on Tuesday, as an article on the Wall Street Journal stated that the German Bundesbank would be willing to back the European Central Bank in "an array of stimulus measures". The idea that the Bundesbank, often considered hawkish-oriented in its advocated monetary policy, could support more dovish policy, helped further weaken the Euro - sending it to trade 50 pips lower versus the Dollar, at a level of 1.371. Wednesday saw the publishing of numerous April European Consumer Price Indices. However, many of those were final estimations of previously announced preliminary figures. Knowing this, investors needed something rather extraordinary in order to shake the markets. Another dosage of the usual muted inflation wouldn’t suffice to send the Euro trading lower versus the Dollar. Evidently, “the usual” was somewhat of understatement to what followed. It started the Germany CPI’s final estimation confirming the preliminary figure at a muted but tolerable 1.1% annual increase, continued with the French CPI presenting 0.7% annual inflation at slightly below analyst expectations of 0.9%, and even saw Spain confirming a positive 0.4% annual inflation print. With nothing out of the ordinary to shake things up, the Euro gained 10 pips against the dollar.

Start Trading NOW!!


Up to a certain point

Market participants saw the Euro slide further versus major currencies on Thursday, fueled by European Central Bank Vice President Vitor Constancio promising the bank would act "swiftly" if needed to battle the low level of inflation prevailing in the Euro Zone. The rest of the day saw the U.S. Initial Jobless Claims published to indicate that only 297K claims have been submitted during the previous week. Aside from breaking the 300K Initial Claims limit, this is also the first time since May 2007 that such a small number of claims were submitted. Interestingly, the effect on the markets was limited, mostly due to the Fed's efforts to make the labor market less cardinal in determining future policy measures. The soon-to-follow release of April’s U.S. Industrial Production decrease by 0.6% Month over Month, versus analyst expectations for a 0.7% increase had a stronger impact on markets sending EUR/USD trading as high as 1.373. Like most rollercoaster rides, this one ended with the EUR/USD at the 1.371 level in which it started. In conclusion, we see that the ECB's promises of more Dovish measures continued translating to a weaker Euro. However, this only held up to a certain point. With the ECB’s June 5th announcement, showdown is nearing, and no central bank possesses the privilege to fold. Start Trading NOW!!