Forexpros – The euro traded close to a 15-month low against the U.S. dollar in thin trade on Friday, ending the year on weak note as concerns over the debt crisis in the euro zone continued to dominate market sentiment.
With most investors away on year-end leave, trading volumes were thin, resulting in tight liquidity conditions and irregular volatility.
The single currency came under strong pressure on Thursday after Italy’s Treasury sold just over EUR7 billion of long-term debt maturing between 2014 and 2022, below the maximum target of EUR8.5 billion.
The country sold EUR2.5 billion of 10-year bonds, maturing in March 2022, at an average yield of 6.97%, down from November’s euro-record high 7.56%. The country also auctioned EUR2.5 billion of three-year bonds, at an average yield of 5.62%.
Following the auction, the yield on Italy’s 10-year bonds traded at 7.1%, above the critical 7% threshold widely seen as unsustainable in the long-term.
The sale was seen as the first test of European banks’ willingness to purchase long-term sovereign debt of distressed euro zone countries, following last week’s nearly EUR500 billion cash infusion by the European Central Bank.
Sentiment found brief support on Wednesday after a stronger-than-expected auction of short term Italian government debt.
Italy’s Treasury sold EUR9 billion of six-month bills, at an average yield of 3.25%, down from a record-high 6.50% in a previous auction in November. The country also sold EUR1.73 of two-year zero-coupons at a 5% yield.
Meanwhile, data showed that U.S. pending home sales rose far more-than-expected in November, surging 7.3% after a 10.3% increase the previous month.
The data came after the U.S. Department of Labor said that the number of individuals filing for initial jobless benefits in the week ending December 23 rose to 381,000, disappointing expectations for a rise to 370,000.
Despite, the increase claims have fallen below 400,000, a level historically associated with an improving labor market, in seven of the past eight weeks.
Elsewhere, the yen reached a one-month high against the greenback and a 10-year high against the euro. Japan’s government pledged to intervene in the foreign exchange market to curb the appreciation of the yen when considered necessary.
Earlier in the week, Bank of Japan policymakers indicated that financial market turmoil from the euro zone and the yen’s appreciation were increasing risks for growth in Japan.
In the week ahead trading volumes are expected to remain light. Meanwhile, the U.S. is to release key reports manufacturing activity, jobless claims and non-farm employment change.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets.
Monday, January 2
Markets in the U.S., U.K., euro zone, Australia and New Zealand will be remaining closed for national holidays.
Tuesday, January 3
Markets in Japan will be remaining closed for a national holiday.
The Reserve Bank of Australia is to produce data on commodity prices, a leading indicator of the country’s trade balance.
Meanwhile, Switzerland is to release a report on the purchasing managers’ index, a key indicator of economic health.
In the euro zone, official data is to be published on German unemployment change, a key signal of overall economic health. Elsewhere in Europe, the U.K. is to publish data on manufacturing PMI, an important gauge of economic health.
Later Tuesday, the U.S. is to publish data on manufacturing PMI. The Federal Reserve is also to release the minutes of its latest policy-setting meeting.
Wednesday, January 4
The euro zone is to produce official data on French consumer spending, which accounts for the majority of overall economic activity. Later Wednesday, a preliminary report is to be released on consumer price inflation.
The U.K. is to produce data on construction PMI, a leading indicator of economic health. The Bank of England is also to release a report on net lending to individuals.
Meanwhile, the U.S. is to publish government data on factory orders, a leading indicator of production.
Thursday, January 5
Australia is to produce industry data on a services index, followed by an official report on trade balance.
In the euro zone, official data is to be published on German retail sales, the primary gauge of consumer spending. Meanwhile, the Swiss National Bank is to release a report on foreign currency reserves.
The U.K. is to produce a report on house price inflation, a key indicator of the housing industry’s health, followed by data on services PMI. Later in the day, the Bank of England is to release its credit conditions survey.
Elsewhere, the U.S. is to publish industry data on non-farm employment change, a key indicator of consumer spending, followed by weekly government data on unemployment claims. The country is also to release a report by the Institute for Supply Management on non-manufacturing PMI as well as data on crude oil stockpiles.
Canada is to release official data on raw materials price inflation, a leading gauge of consumer inflation and industry data on PMI.
Friday, January 6
Switzerland is to produce an official report on consumer price inflation, which accounts for a majority of overall inflation.
The euro zone is to publish official data on retail sales, a primary gauge of consumer spending, as well as reports on the unemployment rate in the single currency bloc and German factory orders, a leading indicator of production.
In Canada, official data is to be published on employment change, followed by a report on the unemployment rate.
The U.S. is to round up the week with a government reports on non-farm employment change and the unemployment rate. The country is also to release government data on average hourly earnings, a key indicator of consumer inflation.
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