EURO WEEKLY MARKET RECAP, WEEK AHEAD, AND SCHEDULE

The euro appreciated vis-à -vis the U.S. dollar last week as the single currency tested offers around the $1.3107 level and was supported around the $1.2796 level. The pair gained about 265 pips last week. Remarks from PBOC’s Wu on Friday pushed the common currency to 2006 highs, as did continued speculation the ECB will tighten rates on 7 December and possibly next year. The White House downgraded its GDP forecasts for 2006 and 2007 on account of the housing market slump. Fed Governor Warsh hawkishly called inflation “uncomfortably elevated” and railed against the 50bps of FOMC easing priced in the market. U.S. data saw the final November University of Michigan consumer sentiment index print at 92.1 – down from October’s 93.2; weekly jobless claims were up 12,000 to 321,000; and NAR’s existing home sales measure was is off 12.7% y/y with sales off in 38 states.


In eurozone news, Eurogroup boss Juncker noted “growth is increasing” and “inflation is coming into line” while ECB chief Trichet said the G10’s mood on inflation has not changed. Bundesbank warned against “second-round effects” on EMU-12 wages. German October producer prices were up 0.3% m/m and 4.6% y/y; the November Ifo business climate index improved to 106.8; and German GDP expanded 0.6% q/q – down from 1.1% in Q2.

In eurozone news, Eurogroup boss Juncker noted “growth is increasing” and “inflation is coming into line” while ECB chief Trichet said the G10’s mood on inflation has not changed. Bundesbank warned against “second-round effects” on EMU-12 wages. German October producer prices were up 0.3% m/m and 4.6% y/y; the November Ifo business climate index improved to 106.8; and German GDP expanded 0.6% q/q – down from 1.1% in Q2