187 Billion Hiccup Upsets Euro Cheer

After dropping to lows of 1.4265, the EURUSD finished the week by climbing back to 1.4330(see chart) after Germany posted an improved IFO Business Confidence index at 94.7, the highest reading since July 2008. More worrying though, was a statement released by the European Central Bank advising that the Euro-zone may have to write off 187 billion Euros in debt because of further deterioration in commercial property market conditions.

The report also went on to expressed concerns about the surge in government indebtedness and the continuing reliance of many European banks on emergency funds. In addition, a further Greek credit downgrade is expected in the near future which would place this country under even more pressure than it already is.

The GBPUSD managed to struggle back from lows of 1.6050 to 1.6135 on Friday. The pound eventually received help from the posting of a better-than-expected UK total business investment figure registering only drop of 0.6% in the third quarter. Consequently, as this result bodes well for next week’s release of the GBP growth rate, the pound could receive a further boost if the rate is revised higher.

Next week, there is a major event risk on Tuesday at 8.30am EST when the US GDP will be released. The consensus opinion is that this figure should show an increase of 2.8% in the third quarter. In addition, US existing house sales are projected to rise by 2.5% when this figure is also published on Tuesday.