Investing.com - The euro rallied to a two-year high against the U.S. dollar on Friday, with moves amplified in poor year-end liquidity after European Central Bank Governing Council member Jens Weidmann said keeping interest rates low may endanger political reforms.
According to Germany’s Bild newspaper, Weidmann said low inflation shouldn’t be used to justify loose monetary policy. "We must take care to raise interest rates again in a timely manner should inflation pressures build," he reportedly added.
The euro strengthened broadly following Weidmann’s comments, with EUR/USD climbing to 1.3894, the strongest level since October 31, 2011, before subsequently consolidating at 1.3745, up 0.4%.
The pound also rallied against the greenback, with GBP/USD rising to 1.6578, the highest since August 19, 2011, before ending at 1.6479, up 0.42%.
Trading volumes were thin as many investors already closed books before the end of the year, reducing liquidity in the market and increasing volatility, which helped exaggerate market moves.
Meanwhile, the dollar rose to a fresh five-year high against the yen amid ongoing expectations that the Bank of Japan will have to expand its stimulus program in the coming months in order to meet its target of 2% inflation by 2015.
Official data released Friday showed that consumer price inflation in Japan rose at an annualized rate of 1.2% in November, up from 0.9% in October.
USD/JPY rose to 105.19 on Friday, the highest level since October 3, 2008, before settling at 105.16, up 0.35%.
Elsewhere, the greenback advanced against the commodity-linked Australian, Canadian and New Zealand dollars amid expectations of further stimulus tapering by the Federal Reserve. The U.S. central bank will reduce its bond-buying stimulus program by USD10 billion a month starting in January.
In the week ahead trading volumes are expected to remain light, with many markets closed for the New Year’s holiday.
Meanwhile, China is to release closely-watched data on manufacturing activity, while the U.S. is to publish reports on pending home sales, consumer confidence and jobless claims, as investors attempt to gauge the strength of the world’s two largest economies.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, December 30
The U.S. is to release private sector data on pending home sales, a leading indicator of economic health.
Tuesday, December 31
Markets in Japan and Germany will remain closed for New Year’s Eve.
Australia is to produce data on private sector credit.
Meanwhile, the U.S. is to produce private sector data on consumer confidence and house price inflation, as well as a report on manufacturing activity in the Chicago region.
Wednesday, January 1
China is to publish government data on manufacturing activity, a leading indicator of economic health.
Meanwhile, markets in Japan, Australia, New Zealand, Europe, Switzerland, the U.K., Canada and the U.S. will remain closed for the New Year’s holiday.
Thursday, January 2
Markets in Japan and China will remain closed for a bank holiday. China is also due to release the final reading of its closely watched HSBC manufacturing PMI.
The euro zone is to release revised data on its manufacturing PMI, while Spain and Italy are also to release individual reports, while the U.K. will also release its manufacturing PMI.
Later in the day, the Institute of Supply Management is to release its manufacturing PMI, while the Labor Department is to release its weekly report on initial jobless claims. The U.S. is also to publish data on construction spending.
Friday, January 3
Markets in Japan will remain closed for a bank holiday. China is to produce official data on service sector activity.
In the euro zone, Spain is to publish data on the change in the number of people employed.
Switzerland is to publish the results of its SVME manufacturing PMI in addition to its KOF economic barometer.
Meanwhile, the U.K. is to publish data on activity in the construction sector, a leading indicator of economic health, as well as a report on net lending to individuals.
The U.S. is to round up the week with official data crude oil stockpiles and natural gas inventories.
According to Germany’s Bild newspaper, Weidmann said low inflation shouldn’t be used to justify loose monetary policy. "We must take care to raise interest rates again in a timely manner should inflation pressures build," he reportedly added.
The euro strengthened broadly following Weidmann’s comments, with EUR/USD climbing to 1.3894, the strongest level since October 31, 2011, before subsequently consolidating at 1.3745, up 0.4%.
The pound also rallied against the greenback, with GBP/USD rising to 1.6578, the highest since August 19, 2011, before ending at 1.6479, up 0.42%.
Trading volumes were thin as many investors already closed books before the end of the year, reducing liquidity in the market and increasing volatility, which helped exaggerate market moves.
Meanwhile, the dollar rose to a fresh five-year high against the yen amid ongoing expectations that the Bank of Japan will have to expand its stimulus program in the coming months in order to meet its target of 2% inflation by 2015.
Official data released Friday showed that consumer price inflation in Japan rose at an annualized rate of 1.2% in November, up from 0.9% in October.
USD/JPY rose to 105.19 on Friday, the highest level since October 3, 2008, before settling at 105.16, up 0.35%.
Elsewhere, the greenback advanced against the commodity-linked Australian, Canadian and New Zealand dollars amid expectations of further stimulus tapering by the Federal Reserve. The U.S. central bank will reduce its bond-buying stimulus program by USD10 billion a month starting in January.
In the week ahead trading volumes are expected to remain light, with many markets closed for the New Year’s holiday.
Meanwhile, China is to release closely-watched data on manufacturing activity, while the U.S. is to publish reports on pending home sales, consumer confidence and jobless claims, as investors attempt to gauge the strength of the world’s two largest economies.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, December 30
The U.S. is to release private sector data on pending home sales, a leading indicator of economic health.
Tuesday, December 31
Markets in Japan and Germany will remain closed for New Year’s Eve.
Australia is to produce data on private sector credit.
Meanwhile, the U.S. is to produce private sector data on consumer confidence and house price inflation, as well as a report on manufacturing activity in the Chicago region.
Wednesday, January 1
China is to publish government data on manufacturing activity, a leading indicator of economic health.
Meanwhile, markets in Japan, Australia, New Zealand, Europe, Switzerland, the U.K., Canada and the U.S. will remain closed for the New Year’s holiday.
Thursday, January 2
Markets in Japan and China will remain closed for a bank holiday. China is also due to release the final reading of its closely watched HSBC manufacturing PMI.
The euro zone is to release revised data on its manufacturing PMI, while Spain and Italy are also to release individual reports, while the U.K. will also release its manufacturing PMI.
Later in the day, the Institute of Supply Management is to release its manufacturing PMI, while the Labor Department is to release its weekly report on initial jobless claims. The U.S. is also to publish data on construction spending.
Friday, January 3
Markets in Japan will remain closed for a bank holiday. China is to produce official data on service sector activity.
In the euro zone, Spain is to publish data on the change in the number of people employed.
Switzerland is to publish the results of its SVME manufacturing PMI in addition to its KOF economic barometer.
Meanwhile, the U.K. is to publish data on activity in the construction sector, a leading indicator of economic health, as well as a report on net lending to individuals.
The U.S. is to round up the week with official data crude oil stockpiles and natural gas inventories.