Euro Hits New All Time Highs Before Retracing

The Euro hit a new all-time high of 1.3813 following the release of the ECB monthly bulletin, which confirmed to the market that inflation risks were to the upside and monetary policy remained accommodative. Despite the weaker US consumer spending numbers, the rebound in the dollar suggests that the rally in the Euro is becoming exhaustive.

Even though ECB officials have remained relatively quiet about the EUR/USD?s movement, the higher the Euro rises, the greater the risk that ECB officials will become concerned. Previous tops in the currency pair have been triggered by cautionary comments from ECB President Trichet and there is no reason why this couldn?t happen again. French consumer prices fell short of expectations, but excluding tobacco prices, consumer prices were higher than expected. Eurozone consumer prices and the German ZEW survey of analyst sentiment are the only potentially market moving releases in the week ahead. Switzerland has retail sales and the trade balance, which could help drive gains in the Swiss Franc.