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Fundamental Headlines

• Opposition Unites in Egypt - Wall Street Journal

• Asian Shares Take a Hit - Wall Street Journal

• Investors Default to Havens Amid Egypt Turmoil - Financial Times

• European Financials Defy Sovereign Debt Crisis in January Rally - Bloomberg

• Egypt Spurs Jump in Developing Money-Market Rates - Bloomberg

EURUSD: Retail sales in Germany fell 0.3 percent in December after tumbling 1.9 percent the month prior amid economists' expectations of a 2.0 percent advance. At the same time, the annualized rate dropped 1.3 percent amid predictions of a 1.1 percent gain. Indeed, the reading does not bode as the decline in retail sales hints that the largest economy in Europe is coming under pressure. Looking ahead, market participants may witness further decreases in retail sales in Germany as well as the rest of the bloc as households become wary of the economic outlook as debt contagion fears re-enter the spotlight. Not to overlook, the tensions in Egypt paired tensions in the European bond markets will likely lead individuals to scale back spending until the recovery is cemented.

Meanwhile, Ireland slashed its growth forecast for 2011 from 2.4 percent to 1.0 percent, citing that prospects for Irish domestic demand is subdued, while noting that prospects for the Irish economy have deteriorated. The announcement comes to no surprise as tough austerity measures and elevated debt levels are expected to weigh on economic activity. Going forward, currency traders should not rule out further downgrades by countries in the bloc, which will in turn validate my bearish bias for the euro, specifically, the EURCHF. Traders will now shift their focus to the ECB rate decision which will be released on Wednesday at 12:45 GMT.

Written by Michael Wright, Currency Analyst

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Michael Wright is the author of FX Headlines, Fundamentals vs. Technical's, Weekly Spotlight, and Forex Trading Weekly Forecast

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