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Forex - Weekly outlook: December 15 - 19

Published 12/14/2014, 06:12 AM
Updated 12/14/2014, 04:12 PM
© Reuters.  Dollar moves lower against euro despite U.S. data

Investing.com - The dollar was lower against the euro on Friday following the release of strong U.S. economic data, but surged to more than five year highs against the commodity-exposed Canadian dollar as oil prices continued to drop.

EUR/USD was up 0.44% to 1.2461 in late trade. The dollar remained lower despite data showing U.S. consumer sentiment rose to an almost eight-year high in December.

The preliminary reading of the University of Michigan's consumer sentiment index rose to 93.8, the highest level since January 2007 and ahead of forecasts of 89.7. Consumer sentiment was boosted by the improving outlook for employment and wage growth and lower gasoline prices.

The data underlined expectations for a hike in U.S. interest rates by the Federal Reserve next year.

The U.S. dollar index, which measures the greenback against a basket of six major currencies, recovered from session lows of 88.12 following the report to settle at 88.34, still off 0.26% for the day. On Monday the index rose to a five year high of 89.53.

The dollar also pushed higher against the yen, with USD/JPY at 118.77 in late trade, off lows of 118.05.

Elsewhere, the Canadian dollar fell to five-and-a-half year lows, with USD/CAD hitting highs of 1.1590, before easing back to 1.1578 in late trade.

Oil prices dropped to their lowest level in five years on Friday after the International Energy Agency cut its forecast for global oil demand for the fifth time in six months.

Canada is a major oil exporter and the currency's sensitivity to crude prices has intensified as prices continued to tumble.

The Russian ruble fell to record lows against the dollar on Friday and the Norwegian krone fell to 11-year lows after rate hikes by both countries central banks on Thursday failed to offset the selling pressure brought to bear by the continued decline in oil prices.

USD/RUB jumped 3.23% to 58.20 late Friday while USD/NOK was up 0.98% to settle at 7.36 after hitting highs of 7.39 earlier, the most since September 2003.

In the week ahead, investors will be awaiting the outcome of Wednesday’s Federal Reserve policy meeting for further clarification on when interest rates might start to rise. Japan’s central bank is also to hold a policy setting meeting next week. The euro zone is to produce what will be closely watched reports on private sector activity.

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

Monday, December 15

Japan is to publish reports on the Tankan manufacturing and non-manufacturing index.

Switzerland is to publish data on producer price inflation.

In the euro zone, Germany’s Bundesbank is to publish its monthly report.

The U.K. is to release private sector data on industrial order expectations.

Later Monday, the U.S. is to release reports on manufacturing activity in the New York region and industrial production.

Tuesday, December 16

The Reserve Bank of Australia is to publish the minutes of its latest policy meeting, which contain valuable insights into economic conditions from the bank’s perspective.

China is to publish the preliminary reading of its HSBC manufacturing index.

In the U.K., the Bank of England is to publish its financial stability report. BoE Governor Mark Carney is to hold a press conference about the report.

The U.K. is also to release data on consumer inflation, which accounts for the majority of overall inflation.

The euro zone is to publish preliminary data on private sector activity, while Germany and France are to also to publish data on private sector growth.

The ZEW Institute is to release its closely watched report on German economic sentiment, a leading indicator of economic health.

Canada is to produce data on manufacturing sales and foreign securities purchases.

The U.S. is to publish reports on building permits and housing starts.

Later in the day, New Zealand is to release data on its current account.

Wednesday, December 17

Japan is to publish a report on its trade balance.

The U.K. is to release data on the change in the number of people employed, the unemployment rate and average earnings. In addition, the BoE is to publish the minutes of its latest policy meeting.

The euro zone is to produce revised data on consumer price inflation.

Canada is to publish a report on wholesale sales.

The U.S. is to release data on consumer inflation and the current account. Later Wednesday, the Federal Reserve is to publish its rate statement and economic projections for the next two years. Fed Chair Janet Yellen is to hold what will be a closely watched press conference.

New Zealand is to release data on gross domestic product, the broadest indicator of economic activity and the leading measure of the economy’s health.

Thursday, December 18

Switzerland is to report on its trade balance.

The Ifo Institute is to release a report on German business climate.

The U.K. is to release data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity.

The U.S. is to release data on initial jobless claims and manufacturing activity in the Philadelphia region.

Friday, December 19

New Zealand is to release private sector data on business confidence.

The Bank of Japan is to announce its benchmark interest rate and publish its rate statement, which outlines economic conditions and the factors affecting the monetary policy decision. The bank will hold a press conference following the announcement.

Germany is to release a report by Gfk on consumer climate.

The U.K. is to release data on public sector net borrowing, as well as a private sector report on retail sales.

Canada is to round up the week with reports on retail sales and consumer inflation.

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