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Forex - Weekly outlook: May 26 - 30

Published 05/25/2014, 05:14 AM
Euro falls to three month lows against dollar and 17 month lows against pound

Investing.com - The euro fell to three-month lows against the dollar on Friday and hit the lowest level in 17 months against the pound after weak German business sentiment data underlined expectations that the European Central Bank will ease monetary policy at its next meeting in June.

The drop in the euro came after a report showed that the German Ifo business climate index declined to 110.4 in May; the lowest reading this year, from 111.2 in April, indicating that economic activity could slow in coming months.

The data came one day after a report showing that manufacturing activity in the euro zone expanded at the slowest rate in six months in May.

Recent comments by senior ECB officials have signaled that the bank is open to acting as soon as June to stop inflation in the currency bloc from falling too low.

On Thursday, ECB Governing Council member Jens Weidmann said the bank is prepared to take unconventional measures to counter the risks of low inflation in the euro zone.

EUR/USD hit lows of 1.3616, the weakest since February 13 and settled at 1.3630, 0.18% lower for the day. For the week, the pair lost 0.60%.

EUR/GBP touched lows of 0.8082, the lowest since December 2012 before pulling back to 0.8099 at the close, ending the week 0.69% lower.

Meanwhile, EUR/JPY ended Friday’s session at 139.02, not far from the three-and-a-half month trough of 138.13 struck on Wednesday.

The dollar moved higher against the yen, with USD/JPY up 0.24% to 101.96 late Friday, recovering from the three-and-a-half month lows of 100.81 reached on Wednesday. The pair ended the week with gains of 0.49%.

The dollar was boosted after data on new home sales added to signs of a recovery in the housing market.

The Commerce Department reported that sales of new homes rose by a larger-than-expected 6.4% to 433,000 in April, after two months of decline. Analysts had been expecting a figure of 425,000. March's number was revised up from 384,000 to 407,000.

The upbeat data boosted the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, to a six-week high of 80.49 before easing back to 80.40 at the close.

In the coming week, markets in the U.K. will be closed for a public holiday on Monday, while U.S. markets will also be closed for the Memorial Day holiday. Investors will be looking ahead to revised data on U.S. first quarter growth, while Tuesday’s report on consumer confidence will also be in focus.

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

Monday, May 26

New Zealand is to publish data on the trade balance, the difference in value between imports and exports.

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

ECB President Mario Draghi is to speak at an event in Portugal; his comments will be closely watched.

Markets in the U.K. are to remain closed for a public holiday, while U.S. markets will also be closed, for the Memorial Day holiday.

Tuesday, May 27

Switzerland is to release data on the trade balance and the employment level.

The U.K. is to publish a private sector report on mortgage approvals.

ECB President Mario Draghi is to speak at an event in Portugal; his comments will be closely watched.

The U.S. is to produce data on durable goods orders, house price inflation and consumer confidence.

Wednesday, May 28

BoJ Governor Haruhiko Kuroda is to speak at an event in Tokyo.

New Zealand is to release private sector data on business confidence, while Australia is to produce a report on completed construction work.

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

In the euro zone, France is to release data on consumer spending, while Germany is to publish a report on unemployment change. The euro zone is to release data on M3 money supply and private loans.

The U.K. is to publish private sector data on retail sales.

Thursday, May 29

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

Australia is to publish data on private capital expenditure.

Canada is to produce data on the current account.

The U.S. is to release revised data on first quarter GDP, as well as the weekly government report on initial jobless claims and data on pending home sales.

Friday, May 30

New Zealand is to release data on building consents.

Japan is to release preliminary data on industrial production, as well as reports on household spending and inflation.

In the euro zone, Germany is to publish a report on retail sales. Elsewhere in Europe, Switzerland is to publish its KOF economic barometer.

Canada is to publish the monthly report on GDP growth.

The U.S. is to round up the week with a report on personal income and expenditure and revised data from the University of Michigan on consumer sentiment.

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