Investing.com - The euro surged to the highest level since October 2011 against the U.S. dollar on Friday, with moves amplified in poor year-end liquidity after European Central Bank Governing Council member Jens Weidmann warned against keeping interest rates low.
EUR/USD rallied to 1.3894, the strongest level since October 31, 2011, before pulling back to settle at 1.3745, up 0.4%. For the week, the pair advanced 0.53%.
The pair is likely to find support at 1.3672, the low from December 26 and resistance at 1.3894, Friday’s high.
Trading volumes were thin as many investors already closed books before the end of the year, reducing liquidity in the market and increasing volatility, which helped exaggerate market moves.
ECB Governing Council member Weidmann, who also heads the German Bundesbank, said Friday that keeping interest rates low may endanger political reforms. He added that low inflation shouldn’t be used to justify loose monetary policy.
"We must take care to raise interest rates again in a timely manner should inflation pressures build," Weidmann said.
Demand for the greenback remained supported amid expectations of further stimulus tapering by the Federal Reserve. The U.S. central bank will start reducing its bond-buying stimulus program by USD10 billion a month in January, amid indications of an improving U.S. economy.
Some market participants believe the Fed will likely reduce its bond purchases by USD10 billion in each of its next seven meetings before ending the program in December 2014, as the U.S. recovery deepens.
Data on Thursday showed that the number of individuals filing for initial jobless benefits declined by 42,000 to a seasonally adjusted 338,000 last week. Analysts were expecting U.S. jobless claims to fall by 35,000 to 345,000 from the previous week’s revised total of 380,000.
In the week ahead, the U.S. is to publish reports on pending home sales, consumer confidence and jobless claims, as investors attempt to gauge the strength of the world’s largest economy.
Trading volumes are expected to remain light, with many markets closed for the New Year’s holiday.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, December 30
Italy is to hold an auction of five-and-ten-year government debt.
Meanwhile, the U.S. is to release private sector data on pending home sales, a leading indicator of economic health.
Tuesday, December 31
Markets in Germany will remain closed for New Year’s Eve. Meanwhile, the U.S. is to produce private sector data on consumer confidence and house price inflation, as well as a report on manufacturing activity in the Chicago region.
Wednesday, January 1
Markets in Europe and the U.S. will remain closed for the New Year’s holiday.
Thursday, January 2
The euro zone is to release revised data on its manufacturing PMI, while Spain and Italy are also to release individual reports.
Later in the day, the Institute of Supply Management is to release its manufacturing PMI, while the Labor Department is to release its weekly report on initial jobless claims. The U.S. is also to publish data on construction spending.
Friday, January 3
In the euro zone, Spain is to publish data on the change in the number of people employed.
The U.S. is to round up the week with official data crude oil stockpiles and natural gas inventories.
EUR/USD rallied to 1.3894, the strongest level since October 31, 2011, before pulling back to settle at 1.3745, up 0.4%. For the week, the pair advanced 0.53%.
The pair is likely to find support at 1.3672, the low from December 26 and resistance at 1.3894, Friday’s high.
Trading volumes were thin as many investors already closed books before the end of the year, reducing liquidity in the market and increasing volatility, which helped exaggerate market moves.
ECB Governing Council member Weidmann, who also heads the German Bundesbank, said Friday that keeping interest rates low may endanger political reforms. He added that low inflation shouldn’t be used to justify loose monetary policy.
"We must take care to raise interest rates again in a timely manner should inflation pressures build," Weidmann said.
Demand for the greenback remained supported amid expectations of further stimulus tapering by the Federal Reserve. The U.S. central bank will start reducing its bond-buying stimulus program by USD10 billion a month in January, amid indications of an improving U.S. economy.
Some market participants believe the Fed will likely reduce its bond purchases by USD10 billion in each of its next seven meetings before ending the program in December 2014, as the U.S. recovery deepens.
Data on Thursday showed that the number of individuals filing for initial jobless benefits declined by 42,000 to a seasonally adjusted 338,000 last week. Analysts were expecting U.S. jobless claims to fall by 35,000 to 345,000 from the previous week’s revised total of 380,000.
In the week ahead, the U.S. is to publish reports on pending home sales, consumer confidence and jobless claims, as investors attempt to gauge the strength of the world’s largest economy.
Trading volumes are expected to remain light, with many markets closed for the New Year’s holiday.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, December 30
Italy is to hold an auction of five-and-ten-year government debt.
Meanwhile, the U.S. is to release private sector data on pending home sales, a leading indicator of economic health.
Tuesday, December 31
Markets in Germany will remain closed for New Year’s Eve. Meanwhile, the U.S. is to produce private sector data on consumer confidence and house price inflation, as well as a report on manufacturing activity in the Chicago region.
Wednesday, January 1
Markets in Europe and the U.S. will remain closed for the New Year’s holiday.
Thursday, January 2
The euro zone is to release revised data on its manufacturing PMI, while Spain and Italy are also to release individual reports.
Later in the day, the Institute of Supply Management is to release its manufacturing PMI, while the Labor Department is to release its weekly report on initial jobless claims. The U.S. is also to publish data on construction spending.
Friday, January 3
In the euro zone, Spain is to publish data on the change in the number of people employed.
The U.S. is to round up the week with official data crude oil stockpiles and natural gas inventories.