Monday, 31 Jan 2011

Markets Stabilize, Canadian GDP Due

The euro was trading stronger at the start of the week following higher than expected inflation data from the EU. The dollar was mixed as markets have tempered following Friday's flight to quality.

During the lunch hour of European trading, the euro was up versus the dollar after the EU released flash CPI numbers that were higher than expected. In January CPI climbed 2.4% compared with a rise of 2.2% in December. Economists were expecting inflation to come in at 2.3% for January. Inflationary pressures in the euro zone are widening interest rate expectations between the EU and the US.

This helped the euro climb back against the dollar after last Friday's declines following market tensions over the mass protests in Egypt. Global markets appear to be calmer after having the weekend to monitor the events in the Middle East. Despite the muted reaction this Monday to the continuation of Egyptian protests, European bourses are only down slightly with the DAX trading lower by 0.33% and the FTSE down by a mere 0.12%.

The EUR/USD is up at 1.3660 after opening this week trading at 1.3610. The EUR/CHF was up at 1.2880, after opening at 1.2817. The USD/JPY was trading higher at 82.20 after failing to breach below the 82 support level.

Commodities were mixed with spot crude oil up at $89.25 from $89.40. Spot gold was at $1,326 from $1,335.

Later today Canadian GDP numbers and the US Chicago PMI will be released. The CAD/USD has tested and failed to breach the 1.0030 resistance level and has since moved lower. Support is located at 0.9910. However, should the pair move above the 1.0030 level, momentum could carry the USD/CAD to the 1.2000 area.