Last night, Angela Merkel, German Chancellor met with her Italian counterpart, Prime Minister Mario Monti to discuss and review the latest economic reform measures. NEws of the meeting sent EUR/USD to an overnight high of 1.2733, Clearly the market indicating it’s positivity regarding the planned steps to Italian economic consolidation.
Very soon however, the forex currency pair rebounded back and fell to a new 16-month low of 1.2662 in anticipation the meeting today of the ECB. David Riley, senior analyst at Fitch spoke to journalists to warn of a potential ‘cataclysmic’ collapse of the euro and the euro zone in general if the ECB fails to increase its purchases through the Securities Markets Programme. On the other side, Andrew Wilkinson analyst at Miller Tabak & Co. reported that, ‘the market will probably be disappointed tomorrow in terms of what the ECB will do with buying bonds or lowering the interest rates, and that may weigh on the euro.’ In December the European Central Bank significantly lowered the interest rates to only 1%. The general feeling is that it’s best to keep them on hold for the time being and not make any additional changes until the recent effects are realized. Only 6 of 53 European Central Bank members voting for and supporting an additional interest rate cut.
Resistance is maintained at yesterday’s high of 1.2818. The following European and US market sessions are expected to be anything but quiet, especially since the ECB had further rounds of meetings taking place today. In addition, the US retail sales and jobless claims numbers to be released soon.
