Currency report: An end to corrections

Last week was exciting on other markets, with lots of interesting fundamental data being released from both the US economy and the euro zone.

Bad news from the US economy included decreases in retail sales (-0.4 percent), building permits (-8.1 percent) and housing starts

(-14.2 percent). Merill Lynch's announcement that its quarterly losses had amounted to around $9.8 (zł.24.3) billion, the worst quarterly result in the bank's history, didn't help matters. With regard to inflation, the Producer Price Index noted a decrease by 0.1 percent in December, against an expected increase of 0.2 percent, while the Consumer Price Index increased by 0.3 percent, as expected.

The EUR/USD decreased, however, reacting to the words of Yves Mersch, a member of the European Central Bank (ECB) council, who stated that there was a risk of an economic slowdown in the euro zone. This was obviously no surprise, but market reactions were based on the significance of whose words these were. The EUR/USD market also bounced back on Mersch's speech and his mention of the ECB's plans to either increase rates in the future or keep them unchanged.

We may have seen an end of the falls on the EUR/USD market and the target in the near future should be the level of $1.48.

Omar Arnaout

X-Trade Brokers Dom Maklerski SA