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The first few trading days will most likely present minor movement on Forex assets, as traders will be focusing on the second part of the week. The ECB and the BOE will take the stage first and release their rate decisions, while the U.S will follow with its unemployment and NFP results.
On the European front, fundamental conditions have been worsening lately as western- European countries have been fighting to recuperate from the economic downfall. Greece has been weighing on investors sentiment and on the ECB, as deficit problems in the country have grabbed news headlines. Furthermore, there are concerns that Greece’s problems could spill over to other economies such as Spain, Ireland and Italy. Greece is currently running up a double digit deficit which exceeds the ECB’s requirements of 3%. On one hand Greece officials are reassuring the markets that their deficit will be covered, while on the other hand the ECB are pressuring them, stating that not enough is being done. The IMF has also recently commented stating that they will “support Greece in any way we can”. Even though a rate decision is coming up minor movement is expected as investors are focusing more on western European problems. Furthermore, the ECB has recently mentioned that they do not intend to discuss their policy until March.
Over in England, the BOE’s statement could have more of an impact as the BOE is reaching its own deadline. The bank recently mentioned that it wouldn’t alter its purchasing program of £200 billion worth of high quality assets, until February. Market participants are expecting that due to the recent uptick in economic data; in the fourth quarter of 2009, the United Kingdom expanded 0.1% qoq, finally emerging from the longest and harshest recession since the 1940s, the BOE could change its stance slightly, and shift to a more tightening attitude.
NFP is once again in the air and will be released on Friday. Even though the last decision didn’t have much of an impact on the markets, this event is known as a major mover. According to the Bureau of Labor Statistics the U.S economy shredded -85,000 jobs in December, while the unemployment rate was unchanged at 10%. The downfall was mainly in construction, manufacturing and wholesale trade. This time round the NFP result could present a positive figure of 20,00k, while the unemployment rate stays at 10.0%. A positive result could spark volatility across the board. To view the full economic calendar click here.
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