The Euro hit a record high of 1.5463 after the US non-farm payrolls report but it ended up retreating almost instantaneously as carry trades came under pressure and news that the Federal Reserve expanded their lending hit the markets minutes after the NFP report. Eurozone economic data continues to be firm with German industrial production rising more than expected.
Unlike the Federal Reserve, the ECB is not particularly worried about the liquidity pressures in the financial markets. Instead, ECB member Weber warned that the markets are underestimating inflation risk. With coffee, corn, rice and other food prices hitting significant highs, we believe that he is 100 percent right. In the week ahead, the two most important releases out of the Eurozone will be the German trade balance and the ZEW survey.
Although economic data suggest that analyst sentiment should improve, this group of critics always tend to lean towards pessimism. Meanwhile the Swiss National Bank has a monetary policy meeting next week. Interest rates are not expected to be changed.
