Forexpros – The euro touched its highest level in three weeks against the U.S. dollar on Friday, boosted by fresh expectations for measures to stem the debt crisis in the euro zone, while solid U.S. second quarter growth data also helped market sentiment.
The euro rose to its highest level since July 6 against the greenback on Friday, following reports that European Central Bank President Mario Draghi is to meet with German central-bank head Jens Weidmann in the coming days to discuss steps to contain the debt crisis, including the purchase of Spanish and Italian bonds.
The euro found strong support on Thursday, coming off an almost two year low against the greenback after Draghi said the ECB will do whatever is necessary to preserve the euro.
German Chancellor Angela Merkel and French President Fran?ois Hollande vowed to defend the euro in a joint statement on Friday and said that they are “deeply committed to the integrity of the euro zone.”
The comments came after the yield on Spanish 10-year bonds surged to a euro-era high of 7.7% on Wednesday, fuelling fears that the country would need a full-scale sovereign bailout, in addition to the rescue package agreed for its banks.
However, the euro pared some of the day’s gains as uncertainty crept back into markets, dampening expectations for any imminent moves by the ECB.
In the U.S, preliminary data showing that economic growth came in broadly in line with expectations in the second quarter tempered expectations for another round of easing measures from the Federal Reserve at its policy meeting next week.
The Commerce Department said U.S. gross domestic product expanded by 1.5% in the three months to June, after growing by an upwardly revised 2.0% in the first quarter.
The data lifted the greenback to a one-week high against the yen, while the pound rose to a five-week high against the greenback.
The commodity linked currencies also rallied against the greenback, with the Australian dollar settling at its highest level since March 27 on Friday, while the New Zealand dollar ended the week at a three-month high against the U.S. dollar.
In the week ahead, investors will continue to keep a close eye on developments in the euro zone, as well as monetary policy decisions by the Federal Reserve, the ECB and the Bank of England.
In addition, Friday’s data on U.S. non-farm payrolls will be highly anticipated as market participants attempt to gauge the strength of the country’s economic recovery.
Ahead of the coming week, Forexpros has compiled a list of these and other significant events likely to affect the markets.
Monday, July 30
New Zealand is to release official data on building consents, a leading gauge of future construction activity, while Australia is to publish industry data on new home sales, a key indicator of economic health. Japan is to produce a preliminary government report on industrial production, an important indicator of economic health.
In the euro zone, Spain is to release preliminary second quarter GDP, the broadest measure of economic activity and the primary gauge of the economy’s health.
Meanwhile, Italy is to hold an auction of 10-year government bonds.
Later Monday, the U.K. is to release official data on net lending to individuals, as well as industry data on retail sales, a leading indicator of consumer spending.
Tuesday, July 31
Japan is to release official data on household spending, one of the most important gauges of economic health, as well as a government report on average cash earnings.
New Zealand is to publish a report on business confidence, a leading gauge of economic health, while Australia is to produce official data on building approvals, followed by a report by the Reserve Bank of Australia on private sector credit.
The U.K. is to publish a report on consumer confidence, an important indicator of consumer spending.
The euro zone is to release preliminary data on consumer price inflation, which accounts for the majority of overall inflation, as well as official data on the unemployment rate. Meanwhile, Germany is to release official data on retail sales and unemployment change, while France is to release data on consumer spending.
Canada is to produce official data on second quarter GDP and raw materials price inflation.
The U.S. is to publish official data on personal consumption expenditures price inflation, as well as on employment costs and personal spending. The country is also to release the Standard & Poor’s / Case-Shiller house price inflation report, followed by Chicago’s purchasing managers’ index and industry data on consumer confidence.
Wednesday, August 1
Australia is to release official data on house price inflation, a leading indicator of the housing industry’s health.
In the euro zone, Spain and Italy are to release data on manufacturing sector growth.
The U.K. is to release two industry reports on house price inflation, followed by data on manufacturing sector activity, a key indicator of economic health. Elsewhere in Europe, markets in Switzerland are to remain closed for a national holiday.
Also Wednesday, the U.S. is to produce data on non-farm employment change, as well as a report on crude oil stockpiles. The Institute for Supply Management is to produce a report on manufacturing activity.
In addition, the Federal Reserve is to announce its benchmark interest rate. The announcement is to be accompanied by the central bank’s rate statement, which discusses the factors affecting the bank’s policy decision and the economic outlook.
Thursday, August 2
Australia is to publish official data on retail sales, the foremost indicator of consumer spending, which accounts for the majority of overall economic activity. The country is also to publish data on the trade balance, the difference in value between imported and exported goods and services.
Switzerland is also to release government data on retail sales, as well as official data on manufacturing sector growth, a leading indicator of economic health.
In the euro zone, the ECB is to announce its benchmark interest rate. The announcement is to be followed by a press conference with central bank president Mario Draghi to discuss the factors affecting the bank’s policy decision and the economic outlook.
The U.K. is to publish a report on construction sector activity, while the BoE is to announce its benchmark interest rate, as well as any changes to the size of its asset purchase program.
Later Thursday, U.S. is to release government data on initial jobless claims and factory orders, a leading indicator of production.
Friday, August 3
Australia and the U.K. are to release reports on service sector activity. Elsewhere, the euro zone is to release official data on retail sales.
The U.S. is to round up the week with government data on non-farm employment change and the country’s unemployment rate, followed by official data on average hourly earnings, as well as an ISM report on non-manufacturing activity.
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