For the past six trading sessions, the EURUSD was on a one way uptrend. Weak US economic data, turmoil in Pakistan and year end repatriation all contributed to the dollar’s weakness. Yet on the last trading day of the year, the mighty buck flexed its muscles and stopped the Euro’s climb. The European Central Bank continues to drain liquidity from the financial system which is good because it means that LIBOR rates are no longer uncontrollably high. Up until the very end of the year, the ECB also continued to remind the markets that they remain hawkish. In a statement released on Saturday, Weber said that rising energy and food prices will keep inflation elevated through the first half of the year. Unless oil prices all of a sudden fall by $10, they will probably hold onto this bias throughout the first quarter of 2008. Although the Eurozone did not release any economic data today, the rest of the week should be busy with German unemployment, manufacturing and service sector PMI due for release. Meanwhile Switzerland will also be reporting PMI numbers and consumer prices.
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