By Fast Brokers – The EUR/USD is consolidating after climbing back above 1.20 in the wake of a return to a risk trade across the board. No news in the EU has proven to be good news for the EUR/USD as sovereign concerns abate. Additionally, solid data from Asia has given a boost of confidence to investors that the global economic recovery is on track despite weakness in the EU. Both employment in Australia and demand for Chinese exports surpassed analyst expectations. Since the EU has been relatively quiet on the data wire this week, positive fundamentals in Asia have allowed the risk trade to rebound and the Euro is following suit. Meanwhile, the ECB kept its previous monetary policy unchanged and Trichet also gave a boost to investor confidence by upping the central bank’s expectations for EU GDP growth. A depreciation of the Euro should boost demand for European made goods, buoying GDP despite budget cuts designed to smash speculators. However, investors should remain cautious. Just because there has been no news does not mean that conditions in PIIGS countries have changed fundamentally. Serious problems remain and the potential for another negative development is on the table. Regardless, stability in the EUR/USD is welcome and it will be interesting to see whether the currency pair can extend its new upward momentum. The FX markets should end the week with a kick since the U.S. will release retail sales and consumer sentiment data. An improvement in U.S. consumption could drive the risk trade higher, whereas a surprise setback in consumption-related data could drag the EUR/USD back towards 1.20. 1.20 is a key psychological level and it wouldn’t be surprising to see another near-term battle ensue.
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