Euro Capped at 1.4580 Ahead of Tuesdays ZEW

Euro extended its rebound past the 1.4550 mark after ECBs Weber reiterates the central banks willingness to "do anything to counter inflation" and that inflation remains a cause of concern. It is expected that Weber and other ECB members will reaffirm their inflation hawkishness after JC Trcihet accentuated the downside risks to the economy in Thursdays press conference.
We expect EURUSD to remain capped at 1.46 ahead of tomorrows release of the closely watched ZEW investment survey (5.00 am EST) is expected to show further deepening pessimism by German financial market participants. The business sentiment index is expected to have dropped to -43.5 in Feb from -41.6 in Jan while the current situation index is seen at 50 from 56.6. Unlike the IFO, the ZEW survey focuses on financial market participants, who are likely to give more negative responses given the deterioration in the markets and accumulated banking and hedge fund losses. Thus, while there is the possibility of seeing the euro crop up to as high as $1.4590s, the ZEW could potentially drag the pair back to 1.45 and to as low as 1.4460. There will be no US data released on Tuesday, which may accelerate losses towards 1.4440.