This week was to be an exciting week on other markets with lots of interesting fundamental data entering the market, both from the US economy and the Euro-zone. What has to be mentioned is the fact that even though data from the US market was worse than analysts expected, the market seemed to only notice and react to the positive insight with addition to the negative feedback from the Euro-zone. Negative feedback from the US economy included lower than expected retail sales (-0.4%), building permits (-8.1%), housing starts (-14.2%), with the addition to Merill Lynch that announced that its quarterly losses amounted up to 9.8 Billion Dollars, which is also the worst quarterly result in the Banks history. With regard to inflation, the PPI noted a decrease by 0.1% against an expected increase by 0.2% in December, whilst the CPI increased by 0.3% as expected.

The EURUSD however decreased, reacting to the words of Yves Mersch, member of the ECB council, who stated that there is risk of economic slowdown in the Euro-zone. This is obviously no surprise, but the markets reaction was based on the significance of whom those words came from. What is interesting is that the EURUSD market also bounced back owing to Mersch, and his words regarding the ECB’s plans to either increase rates in the future or keep them unchanged.

I currently believe that it may be the end of the falls on the EURUSD market and that the target in the near future should be the level of 1.48.

Omar Arnaout