The Euro is hovering not far from its record highs as it waits for direction from the US Federal Reserve. The German ZEW survey is due out tomorrow and we expect a sharp drop in business confidence as the problems in the credit markets drive borrowing costs higher.
As a major exporter, Germany is especially vulnerable to a global slowdown. Although this will probably weigh on the Euro the impact should be limited as the real action in the currency pair may not come until 2:15pm EST, when the Federal Reserve makes their monetary policy decision. If the Fed only reduces rates by 25bp, we may see a near term top in the EUR/USD. We are also expecting Swiss industrial production. The SNB was surprisingly hawkish last week and the market expects the numbers to confirm their rosy economic outlook.
Written by Kathy Lien, Chief Currency Strategist of DailyFX.com