By Richard Rittorno
As we begin the final session of the week, the euro catches a bid against the U.S. dollar after eurozone leaders announced it will allow some of the troubled counties like France, Spain and Portugal to take additional time to lower their respective budget deficits, easing some of the burden of austerity.
News from a Brussels meeting that leaders were looking at possible bailout package for Cyprus also helped to send the euro higher. The eurozone leaders and International Monetary Fund officials hope to have an outline for the Cyprus bailout by end of the day.
On the other side of the pair, the U.S.' final week’s economic data came in mixed, with Empire State manufacturing index falling less than expected. Expectations were for the index to fall 8.4, but rather it printed an impressive 9.4, only 0.06 off the previous month’s 10.
Also released today was the Core Consumer Price Inflation (CPI). The core excludes food and energy, which climbed 0.2% for February on top of last month’s increase 0.3%.
Consumer Price Inflation also dampened sentiment, with a 0.7% increase compared to analysts’ expectations of an increase of 0.5% after the previous month of 0%.
Bottom Line: The news out the eurozone seems positive on the headlines, but when market participants really think about and pull the emotion out, the news is not all that positive. If these countries need more time to get their house in order, it is only going to prolong the issues and make these countries more vulnerable to additional downside and unforeseen issues.
You can see this reaction in the daily chart of the EUR/USD. Price action pierced the downward trendline that began at the beginning of year and rapidly pulled back below the line, putting the bears back in charge.