Week in FX Europe – Juncker and Nowotny Staments Move Euro in Different Directions

EUR/USD has taken traders for a roller-coaster ride this week, displaying sharp movement in both directions. We have seen the pair test the 1.34 level, but also fall all the way down to the 1.3260 range. The volatility shows no sign of letting up, as the euro has coughed up some of its recent gains in the Friday European session, and is trading in the 1.3340 range. The markets were busy on Thursday, as the US released a host of key economic data. Unsurprisingly, the data was a mix, although mostly of a positive nature. Market sentiment jumped as employment and housing numbers were outstanding, hitting multi-year highs. Unemployment Claims, which had looked weak earlier in January, bounced back with its best performance in five years, dropping to 331 thousand new claims. This easily beat the forecast of 369K. Housing Starts also were outstanding, improving to 0.95 million. This beat the forecast of 0.89M, and was the indicator’s highest level since June 2008.

Earlier in the week, the euro dropped following negative remarks by Jean-Paul Juncker, only to reverse direction after another senior ECB official stated the opposite. Juncker, held of the Eurogroup, shook up the markets after bluntly warning that the “euro foreign exchange rate is dangerously high”. The markets jumped on his comments, and the euro quickly headed south, falling below the 1.33 line. On Wednesday, a member of the ECB governing council, Ewald Nowotny, weighed in, stating that the Eurozone situation had shown improvement, and the ECB was not concerned about the recent gains by the euro. These positive sentiments gave a boost to the euro, as it barreled above 1.33. Market players, scrambling to keep up with the latest comments of the day about the value of the euro, must be hoping for more action and less talk from senior ECB officials.

• David Cameron cancelled speech today, European stocks lower
• Euro Pushes to within reach of 1.34 as Spain’s Borrowing Costs Decline
• Russia Indicates that the World Is Nearing A Currency War
• Were we too optimistic? World Bank Slashs 2013 Growth Forecast
• Juncker: Euro Exchange Rate Is ‘Dangerously High’
• ECB’s Nowotny to Speak as the Euro Remains Lower
• Europe Factory Output Falls for Third Straight Month
• Euro Leaders Declaring Worst Is Over Turn to Economy Woes

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