FXstreet.com (London) - Dollar ended the week on a bullish note last Friday, as the US reported an increase in Retail sales and consumer sentiment. Greenback surged, hitting a three-month high against the flailing Euro, EUR/USD printing 1.4586. The dollar index, a trade-weighted basket of the major dollar-pairs, hit its highest level in over a month, topping out at 76.726.
Looking ahead more Dollar volatility is likely, with the FED holding its policy setting meeting over Tuesday and Wednesday this week. While the Central Bank is highly expected to hold rates firm at 25bps, investors will be closely monitoring language in any accompanying policy statements for insights into future decisions and timelines.
Three key indicators for inflation bears will be CPI, PPI, and Industrial production figures.
Earlier this week, investors will be focussing on the Eurozone, as the looming Dubai sovereign debt issue takes centre stage once more. Nakheel, the state-owned property developer, is due to pay out on a large bond today. Having heard little noise around any payment plan, investors will be watching closely what happens, and gauging the strength of any restructuring plans. Investors will be looking for clarity from the debt-laden developer.
Markets moved positively on Friday as several investors bet on payment of the bonds, despite the fiscal woes of Dubai right now. On Friday the EUR fell 1.29% versus the Dollar. Early in the session the pair is trading at 1.4627/8, up 6 pips from the open.
Tankan, the quarterly poll of business confidence in Japan, falls due early this session, with Manufacturing and Industrial Production figures (0430 GMT) also set to give an update on the status of the Japanese economy. We will be reporting the markets reaction the poll later this session. A soaring Yen could force the BoJ to ratchet up its attempts to contain the ever-strengthening currency.
In early Asian trading Yen has strengthened, USD/JPY moving sharply to the downside and trading at 89.12/5 (-0.15%), after a quick correction from day lows of 89.05. Choppy markets are likely ahead of further figures as investors jostle to take their position prior to the news. Early Tankan figures are positive, pointing to increased confidence in industry.