The market is lacking the confidence to extent last week's bullish tone. Following a mixed session in Asia, a slow start to European trading has led to declines in stocks and an accompanying move into favoured safe haven currency trades; EUR/USD and USD/JPY have both moved lower in the past few hours while the AUD and CAD have given back some of their recent gains.
At the close of last week EUR/USD surged to close above its 200 day moving average (1.3464) for the first time since last August. The bullish technical picture supported EUR/USD through Asian hours but buying interest has subsequently petered out. There is little US data due until the retail sales report on Wednesday and with German and French Q1 GDP reports later this week expected to highlight the economic weakness experienced in the first three months of the year, the market is questioning whether there is justification in extending last week's rally in risk.
Counter to the recent trend in economic data releases, this morning's publication of French and Italian Mar industrial production registered worse than expected contractions in activity.
Sterling will have the publication of the BoE's Inflation Report to get its teeth into Wednesday. Given that the BoE surprised the market last week by increasing the amount of assets it would buy, the chances are that the tone of the inflation report will be dovish.
Some cable buying was reported around the London open. However, cable has sunk back to the USD1.51 level and EUR/GBP has climbed to within a whisker of 0.900. The pound is likely to remain on the defensive ahead of the Inflation Report.
Upcoming Economic Data Releases (US Session). Prior, Expected
| 5/11/2009 | 12:30 | CA | New Housing Price Index MoM | MAR | -0.70% | -0.50% |
| 5/11/2009 | 22:45 | NZ | Food Prices (MoM) | APR | 0.50% | - - |
| 5/11/2009 | 23:01 | UK | BRC April Retail Sales Monitor | 11-May |
