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Forex - Weekly outlook: January 23-27

Forex - Weekly outlook: January 23-27

January 23, 2012 / 09:10 AM IST
Forexpros - The euro was lower against the U.S. dollar on Friday, trimming some of the week's gains as investors sold the currency to lock in gains after it rallied to a two-week high, while talks on restructuring Greece's debt continued for a third day.

The euro found support earlier in the week as successful government debt auctions by Spain and France eased concerns that borrowing costs for euro zone countries would rise, after ratings downgrades on the countries by Standard & Poor's earlier in the month.

Spain sold EUR6.61 billion of medium to long-term debt at broadly lower yields, exceeding the maximum target of EUR4.5 billion set for the auction, while France auctioned EUR7.97 billion of medium and long-term securities.

The euro was also boosted after the International Monetary Fund said it wanted to increase its lending capacity by as much as USD500 billion, having identified a potential need for USD1 trillion in coming years.

On Friday, officials said Greece was nearing an agreement with creditors on a debt restructuring deal, aimed at erasing EUR100 billion of the country's EUR360 billion debt burden and securing another tranche of international aid.

Meanwhile, the pound rallied to a two-week high against the greenback on Friday, after official data showed that U.K. retail sales rebounded strongly in December, increasing 0.6% after a 0.5% drop in November as retailers cut prices to entice Christmas shoppers.

Market sentiment was also bolstered by a string of broadly better-than-expected U.S. economic data.

On Thursday, the U.S. Department of Labor the number of people who filed for unemployment assistance in the week ending January 13 declined unexpectedly, falling to the lowest level in almost four years.

The number of individuals filing for initial jobless benefits fell to 352,000 from 402,000 the previous week, surpassing expectations for a fall to 385,000.

Earlier in the week, official data showed that manufacturing activity in the New York region expanded at the fastest pace in nine months in January.

Other reports showed that U.S. consumer price inflation was flat in December, while U.S. housing starts dropped 4.1% to a 657,000 annual rate last month.

In the coming week, investors will be eyeing developments in the euro zone, with finance ministers from the single currency bloc meeting in Brussels on Monday, with Greece's debt restructuring deal likely to be at the top of the agenda.

Markets will also be closely watching the outcome of Thursday's Federal Reserve policy setting meeting, as well as Friday's preliminary data on U.S. fourth-quarter gross domestic product.

Ahead of the coming week, Forexpros has compiled a list of these and other significant events likely to affect the markets.

Monday, January 23

Australia is to produce official data on producer price inflation, a leading indicator of consumer inflation.

The euro zone is to release a report on consumer confidence, an important indicator of consumer spending.

Later Monday, Canada is to publish its index of leading economic indicators, which is designed to predict the direction of the economy over the coming months.

Tuesday, January 24

Australia is to publish an index of leading economic indicators, designed to predict the future direction of the economy. The Bank of Japan is to announce its benchmark interest rate and release its monetary policy statement, which contains insights into current economic conditions from the bank's perspective. The releases will be followed by a closely watched press conference.

Elsewhere, Switzerland is to release the UBS consumption indicator, which is a combined reading of five economic indicators. Meanwhile, Swiss National Bank policymaker Jean-Pierre Danthine is due to speak later in the day; his comments will be closely watched for any possible indication of the future direction of monetary policy.

The euro zone is to publish preliminary data activity in the manufacturing and service sectors, while France and Germany are to produce individual reports. The euro zone is also to release official data on industrial new orders, a key indicator of production.

Meanwhile, European Union finance ministers are to hold discussions in Brussels throughout the day.

The U.K. is to release official data on public sector net borrowing, while Bank of England Governor Mervyn King is due to speak later in the day.

Also Tuesday, Canada is to publish official data on retail sales, the primary gauge of consumer spending, which accounts for the majority of overall economic activity.

Wednesday, January 25

Australia is to publish official data on consumer price inflation, which accounts for a majority of overall inflation, as well as an index of leading economic indicators. Elsewhere, the BoJ is to publish its monthly report on economic and financial developments.

In the euro zone, the Ifo Institute is to publish a report on German business climate, a key gauge of economic health. European Central Bank President Mario Draghi is due to speak later in the day; his comments will be closely watched for any clues to the future possible direction of monetary policy.

The U.K. is produce preliminary data on GDP, the broadest measure of economic activity and the primary gauge of the economy's health, as well as industry data on mortgage approvals and industrial order expectations. In addition, the BoE is to publish the minutes of its January policy setting meeting.

The U.S. is to release industry data on pending home sales, a leading indicator of demand in the housing market, as well as official data on crude oil stockpiles. The Federal Reserve is to announce the federal funds rate and publish its official rate statement.

Also Wednesday, the Reserve Bank of New Zealand is to announce its benchmark interest rate and publish its official rate statement.

Elsewhere, the World Economic Forum is to begin its five-day annual meeting in Davos in Switzerland where Bank of Canada Governor Mark Carney is due to speak.

Thursday, January 26

Markets in Australia will remain closed due to a national holiday.

The euro zone is to release a report by market researchers Gfk on German consumer climate, a leading indicator of consumer spending.

Meanwhile, the U.K. is to publish industry data on realized sales.

In the U.S., official data is to be produced on durable goods, an important indicator of production, as well as on unemployment claims and new home sales, a key gauge of economic health.

Friday, January 27

New Zealand is to release official data on trade balance, the difference in value between imported and exported goods. Japan is to publish official data on consumer price inflation in Tokyo as well as industry data on retail sales.

Later in the day, the BoJ is to release the minutes of its most recent policy setting meeting.

In the euro zone, the ECB is to release a report on M3 money supply. Elsewhere in Europe, Switzerland is to publish the KOF economic barometer, which is designed to forecast the direction of the economy over the following six months.

The U.S. is to round up the week with preliminary data on the country's fourth quarter GDP and GDP price index, followed by a revised data from the University of Michigan on consumer sentiment and inflation expectations.



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first published: Jan 22, 2012 03:37 pm

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