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Forex - Weekly outlook: June 30 - July 4

Published 06/29/2014, 05:43 AM
Updated 06/29/2014, 05:43 AM
Dollar ends week broadly lower against currency basket

Investing.com - The dollar ended the week lower against a basket of major currencies on Friday as upbeat U.S. consumer sentiment data failed to dispel concerns over the outlook for the wider economic recovery.

The final reading of the University of Michigan's consumer sentiment index rose to 82.5 this month from 81.9 in May, compared to expectations of 82.2.

The report did little to alter expectations that the Federal Reserve will keep rates on hold for an extended period after data earlier in the week showed that U.S. first quarter growth was revised sharply lower.

The dollar weakened across the board after the Commerce Department said Wednesday that U.S. gross domestic product contracted at an annual rate of 2.9% in the first three months of the year, compared to the consensus forecast for a decline of 1.7%.

U.S. first quarter GDP was initially reported to have increased by 0.1%, but was subsequently revised to show a contraction of 1.0%.

The dollar came under additional pressure after data on Thursday showed that U.S. consumer spending rose by just 0.2% in May, below forecasts for 0.4%.

The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, was at 80.08 late Friday, down 0.23%.

EUR/USD ended Friday’s session at 1.3649, up 0.28%. For the week, the pair added 0.43%. USD/JPY was down 0.30% to 101.41 late Friday, extending the week’s losses to 0.66%.

The yen was boosted after stronger-than-forecast data on Japanese retail sales for May curbed expectations for additional monetary easing by the Bank of Japan.

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The euro was flat against the yen late Friday, with EUR/JPY at 138.45, and ended the week down 0.22%.

The pound remained supported above the 1.70 level against the dollar on Friday after data confirmed that the U.K. economy expanded 0.8% in the first three months of 2014. The annual rate of growth was revised to 3.0% from 3.1%.

GBP/USD ended Friday’s session at 1.7036, up slightly from 1.7024 late Thursday.

Elsewhere Friday, the Canadian dollar rose to almost six-month highs against the U.S. dollar, building on gains in recent sessions after strong inflation data earlier this month eased concerns over the subdued inflation outlook.

USD/CAD settled at 1.0662, the lowest level since January 7. For the week, the pair tumbled 0.85%.

In the week ahead, investors will be looking to the U.S. nonfarm payrolls report on Thursday for further indications on the strength of the labor market, while Monday’s euro zone inflation report will also be in focus, ahead of the European Central Bank policy meeting and press conference on Thursday.

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

Monday, June 30

New Zealand is to produce private sector data on business confidence, as well as a report on building consents

Japan is to release preliminary data on industrial production.

The euro zone is to produce preliminary data on consumer price inflation, which accounts for the majority of overall inflation. Meanwhile, Germany is to publish data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity.

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The U.K. is to release data on net lending to individuals.

Canada is to publish the monthly report on gross domestic product, the broadest indicator of economic activity and the leading indicator of economic growth.

The U.S. is to produce data on manufacturing activity in the Chicago region and a report on pending home sales.

Tuesday, July 1

Japan is to publish its Tankan manufacturing and non-manufacturing index, as well as data on average cash earnings.

China is to release official data on manufacturing activity, as well as the final reading of the HSBC manufacturing index.

The Reserve Bank of Australia 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 euro zone is to release data on the unemployment rate. Germany is release data on the change in the number of people unemployed, while Spain and Italy are to release reports on manufacturing activity.

Switzerland is to release its SVME manufacturing index.

Markets in Canada will remain closed for the Canada Day holiday.

Later Tuesday, the Institute of Supply Management is to publish a report on U.S. manufacturing activity.

Wednesday, July 2

Australia is to release data on the trade balance, the difference in value between imports and exports.

The U.K. is to produce private sector data on house price inflation, as well as official data on construction activity.

In the euro zone, Spain is release data on the change in the number of people unemployed.

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The U.S. is to release the ADP report on private sector job creation, which leads the government’s nonfarm payrolls report by two days. The U.S. is also to release data on factory orders.

Later Wednesday, Fed Chair Janet Yellen is to speak at an event in Washington; her comments will be closely watched.

Thursday, July 3

Australia is to publish data on building approvals and retail sales. RBA Governor Glen Stevens is to speak at an event in Hobart.

China is to release official data on service sector activity and the HSBC report on service sector growth.

The euro zone is to release data on retail sales, while Spain and Italy are to publish data on service sector activity. The ECB is to announce its benchmark interest rate. The announcement is to be followed by a press conference with President Mario Draghi.

The U.K. is also to release data on service sector expansion.

Both the U.S. and Canada are to publish data on the trade balance, and the U.S. is also to publish the weekly report on initial jobless claims. The U.S. is also to publish what will be closely watched government data on nonfarm payrolls and the unemployment rate, one day ahead of schedule, before the fourth of July holiday.

Later Thursday, the ISM is to publish a report service sector activity.

Friday, July 4

Germany is to publish data on factory orders. Markets in the U.S. are to remain closed for the Independence Day holiday.

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