Forexpros – Last week saw the euro rally to a two-week high against the U.S. dollar, after European Union leaders agreed on a new bailout for Greece, before pulling back as the initial euphoria that followed the agreement faded.
On Thursday, euro zone leaders announced a new aid package for Greece worth EUR159 billion, with bondholders agreeing to contribute to the bailout. They also expanded the role of the European Financial Stability Facility to purchase bonds from indebted nations, assist troubled banks and offer credit lines.
The euro pared gains on Friday as investors questioned whether the new aid deal for Greece was enough to stop the debt crisis from spreading to Italy and Spain and as markets began to focus on efforts to raise the U.S. debt ceiling in order to avert a default.
The U.S. will run out of funds to service its debt on August 2 if Congress does not approve additional borrowing. Talks between U.S. President Barack Obama and Republicans broke down late Friday, amid disagreement over the role of taxes in any deficit reduction plan.
Standard & Poor’s said Thursday that there is a 50-50 chance that the triple-A credit rating of the U.S. could be cut within three months.
The dollar had trimmed losses against the yen on Friday, pulling away from a four-month low, before U.S. talks on the deficit reduction package broke down.
Elsewhere, the Swiss franc pared gains against the euro and the greenback last week, after rallying to record highs amid concerns that the debt crisis in the euro zone was deepening.
The Canadian dollar also pared gains against the greenback, pulling back from a three-and-a-half-year high, after data on Friday showed that inflation had slowed more-than-expected, dampening expectations for a near-term interest rate hike by the Bank of Canada.
In the week ahead, as concerns over the sovereign debt crisis in the euro zone recede, investors will be focusing on U.S. efforts to agree on a USD3 trillion deficit-reduction plan. Markets will also be looking towards Friday’s data on U.S. second quarter gross domestic product, in order to gauge the strength of the U.S. economic recovery.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets.
Monday July 25
Australia is to publish official data on producer price inflation, a leading indicator of consumer inflation. Elsewhere, the U.K. is to publish industry data on mortgage approvals, a leading indicator of housing market demand.
Tuesday, July 26
New Zealand is to release government data on its trade balance, the difference in value between imported and exported goods and services over the month. In Australia, central bank Governor Glenn Stevens is to speak, his comments will be closely watched for any hints to the future possible direction of monetary policy. The country is also to publish an index of leading economic indicators.
Switzerland is to publish an index of consumer spending, a leading indicator of economic health. Meanwhile, in the euro zone, market research group Gfk is to produce a report on German consumer climate.
The U.K. is to release preliminary data on second quarter GDP, the broadest measure of economic activity and the primary gauge of the economy’s health.
Later in the day, the U.S. is to publish government data on new home sales, a leading indicator of economic health, as well as data on consumer confidence and house price inflation.
Wednesday, July 27
New Zealand is to publish data on business confidence, a leading indicator of economic health. Meanwhile, Australia is to publish government data on consumer price inflation, which accounts for a majority of overall inflation.
In the euro zone, Germany is to publish preliminary data on consumer price inflation. Elsewhere in Europe, Switzerland is to publish an economic barometer, which attempts to predict the direction of the economy over the following six months. Also Wednesday, the U.K. is to publish data on industrial order expectations, a leading indicator of economic health.
The U.S. is to publish official data on durable goods orders, a leading indicator of production, as well as government data on crude oil stockpiles. Later in the day, the Federal Reserve is to publish its Beige Book, which contains data the bank looks at when making its next interest rate decision.
Thursday, July 28
The Reserve Bank of New Zealand is to announce its official cash rate. The announcement will be followed by the banks rate statement, which discusses the economic outlook and offers clues on the outcome of future rate decisions.
Japan is to publish official data on retail sales, the primary gauge of consumer spending, which accounts for the majority of overall economic activity.
In the euro zone, Germany is to publish government data on employment change, an important indicator of economic health. Elsewhere, the U.K. is to publish industry data on retail sales.
Later Thursday, the U.S. is to release government data on initial jobless claims, a leading indicator of economic health, as well as industry data on pending home sales.
Friday, July 29
New Zealand is to publish government data on building consents, a leading gauge of future construction activity. Meanwhile, Australia is to release official data on private sector credit.
Japan is to release a flurry of data with government reports on consumer price inflation, household spending, unemployment, manufacturing and housing starts, as well as preliminary data on industrial production, a leading indicator of economic health.
The euro zone is to publish preliminary data on consumer price inflation, which accounts for a majority of overall inflation. Meanwhile, Germany is to publish official data on retail sales.
The U.K. is to release industry data on house price inflation, a leading indicator of the housing industry’s health, as well as a report on consumer confidence, a leading indicator of consumer spending. In addition the Bank of England is to publish data on net lending to individuals and mortgage approvals, important indicators of economic health.
Later in the day, Canada is to publish official data on GDP, the broadest measure of economic activity and the primary gauge of the economy’s health. The country is also to publish government data on raw material price inflation, a leading indicator of consumer inflation.
The U.S. is to round up the week with preliminary data on second quarter GDP, as well as a preliminary report on the GDP price index and an employment cost index. The U.S. is also to publish data on manufacturing activity in the Chicago area, while the University of Michigan is to publish revised data on consumer sentiment and inflation expectations.
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