By Yan Petters
Last week’s most significant trend in the market was surely the bullish euro. The euro gained no less than 580 pips vs. the dollar, completing its highest weekly gain since May 2009. The euro also strengthened about 400 pips against the Japanese yen, and about 200 pips vs. the British pound.
The euro’s bullish trend was mostly due to the Spanish, Italian and Portuguese debt auctions. Analysts were surprised to see the strong demand for the debt purchase, especially considering the fact that these countries are viewed as the ones most likely to eventually seek a financial bailout from the euro-zone. This has showed that the market still has a great deal of confidence in the euro-zone and in its currency.
For the near future, the risk of seeing another member of the euro-zone seeking a financial bailout seems somewhat reduced. This has potential to further support the euro against the dollar. Nevertheless, investors will now pay more attention to the economic releases from Germany, which holds the largest and strongest economy in the euro-zone. If Germany will not manage to deliver positive data, the euro’s bullishness could be corrected.
Today, U.S. banks will be closed in observance of Martin Luther King Day, and a relatively weak news day is expected.
The most significant economic release looks to be the Canadian Foreign Securities Purchases report, which is scheduled for 13:30 GMT. This report measures that total value of domestic stocks, bonds purchased by foreigners during November. If the end result will reach expectations for 10.42B, the CAD may be supported.