The EUR/USD started an upbeat week on Monday with the eyes all concentrated on what lays ahead in the week from the ECB and EU summit which are both expected to deliver good outcomes and support to stem the crisis where the new austerity package from Italy and Merkel and Sakozy’s agreement on a new plan bolstered the confidence.
The week started after the Italian government approved a 30 billion euro austerity and growth package and Monti on Monday presented the package to both houses of Parliament for approval which supported the sentiment that Italy is doing its homework to escape the crisis that sent its borrowing costs to records high.
As for Merkel and Sarkozy they said they have reached agreement on the plan to help end the crisis and on the fiscal integration that is hoped to be for all the EU and still open to be for the euro area which will see strict oversight over the breach of fiscal rules in the Stability and Growth Pact which they will present to the European Commission President this week and they will surely address the EU with it in Brussels.
Hopes that Europe is moving towards bigger steps to stem the crisis and the use of greater tools like the IMF this week is helping ease the tension and supporting the return of the risk appetite in the market. We still expect this sentiment to pickup pace this week and gains to be seen still for the euro unless they disappoint again which will surely trigger a massive selloff to the end of the week.
As for the data on Tuesday, the euro zone will start the session at 10:00 GMT with the GDP figures for the third quarter in a preliminary reading, where the quarterly and annual seasonally adjusted indexes could have lingered at 0.2% and 1.4% respectively, noting that the Household Consumption index previous reading was 0.2% drop, while the Gross Fixed Capital was at 0.2%, in the time Government Expenditures dropped by 0.2% previously.
Germany will join the session at 11:00 GMT with the Factory Orders index for October, where the annual non-seasonally adjusted index could have expanded by 1.8% compared with the previous expansion of 2.4%, while the monthly seasonally adjusted index is predicted to expand by 1.0% from the previous drop of 4.3%.