Euro Responded With A Dip Below 1.07 On Paris Attacks

Dear Traders,

It is a sad start to this new trading week after the world was shaken by the horrific terror attacks in Paris on Friday. The euro responded to Europe's worst terror attack in a decade with a dip below 1.07, but the losses were short-lived for the time being. The geopolitical tension may prompt investors to a shift to safe-haven currencies such as the U.S. dollar. The attacks increase the uncertainty over the European outlook, but they are unlikely to change the course of the Federal Reserve, which is on track to raise interest rates next month.

Traders should generally anticipate further weakness in the EUR/USD going into the end of the year. Not only weigh geopolitical risks on the currency pair, but expectations for additional ECB easing put pressure on the euro. ECB president Mario Draghi has already signaled to reexamine further stimulus next month. Especially interesting will be the Eurozone's Core CPI figures, scheduled for release today at 10:00 GMT. Draghi signaled that the ECB is paying more attention to the core CPI as a measure of its monetary policy. Once the latest low of 1.0674 is significantly breached, next bearish targets could be at 1.0625 and 1.0585.

Market participants will also focus on the FOMC meeting minutes, due for release on Wednesday, in order to reinforce their expectations of a December liftoff.

GBP/USD

After accelerating three consecutive trading days early last week, the cable took a breather and traded consolidated. In the chart below we have sketched out the price levels we will pay attention to in the short-term.

This week might be more volatile than the previous one. Let us have a look at the weekly schedule.

Important reports and events:

Monday

• Eurozone Consumer Prices (10:00 GMT)
• Mario Draghi is due to speak at the Euro Finance Week in Frankfurt (10:15 GMT)

Tuesday

• U.K. Consumer Prices
• German & Eurozone ZEW Survey
• U.S. Consumer Prices

Wednesday

• U.S. Building Permits
• FOMC Meeting Minutes

Thursday

• U.K. Retail Sales
• Philly Fed Index

Friday

• ECB president Mario Draghi speaks