Forexpros – Forexpros – The U.S. dollar ended the week sharply higher against its Canadian counterpart on Friday, as market sentiment weakened amid concerns over possible credit downgrades in the euro zone after Fitch lowered its outlook on France.
USD/CAD hit 1.0243 on Wednesday, the pair’s highest since November 28; the pair subsequently consolidated at 1.0381 by close of trade on Friday, jumping 1.87% over the week.
The pair was likely to find support at 1.0258, the low of November 29 and resistance at 1.0448, the high of November 28.
Fitch Ratings lowered its outlook on France’s triple-A rating to negative from stable, indicating there’s a 50% change the nation could lose its top investment-grade rating over the next two years.
The ratings agency also put six other euro zone members on review for a downgrade, saying that a “comprehensive solution” to the euro-zone crisis is “technically and politically beyond reach.”
The loonie also came under pressure as crude oil prices fell to USD92.51 a barrel, the lowest since November 3.
Raw materials, including oil account for about half of Canada’s export revenue.
Market sentiment strengthened earlier after European Union leaders unveiled a new agreement to tighten fiscal rules in the euro zone, in order to strengthen economic integration and tackle the region’s financial crisis.
Also Friday, the head of the euro zone’s bailout fund, the European Financial Stability Facility, announced that around EUR600 billion are available to fight the region’s debt crisis, a greater amount than Italy and Spain’s combined funding needs for 2012, and more will be provided in March if needed.
In the U.S., official data showed that core consumer price inflation rose more-than-expected in November, ticking up 0. 2% after a 0.1% increase the previous month.
The report also showed that CPI was flat after a 0.1% decline in October. Analysts had expected CPI in the U.S. to rise 0.1% in November.
Meanwhile, official data showed that Canada’s foreign securities purchases rose less-than-expected in November, climbing CAD2.03 billion after an increase of CAD7.35 billion the previous month.
Analysts had expected foreign securities purchases to rise CAD8.23 billion in November.
The loonie found support on Thursday after the U.S. Department of Labor said that the number of individuals filing for initial jobless benefits last week fell to a three-year low of 366,000.
Data also showed that the New York Federal Reserve’s index of manufacturing conditions jumped to a seven-month high in December, while the Philadelphia Federal Reserve’s index of manufacturing conditions doubled expectations with a reading at 10.3.
The greenback rallied earlier in the week after the Fed held back from indicating further stimulus measures, although it warned that market turbulence stemming from the crisis in the euro zone posed a threat to the U.S. economy.
In the week ahead investors will be keeping a close watch on Tuesday’s report on German business climate, to assess the impact of the debt crisis on the region’s largest economy.
Meanwhile, the U.S. is to release key reports on the housing sector, durable goods and jobless claims, while Canada is to publish data on consumer price inflation and gross domestic product.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets.
Monday, December 19
Canada is to produce official data on wholesale sales, a leading indicator of consumer spending.
Tuesday, December 20
Canada is to release government data on consumer price inflation, which accounts for the majority of overall inflation.
Later Tuesday, the U.S. is to publish official data on building permits, an excellent gauge of future construction activity, as well as a report on housing starts.
Wednesday, December 21
Canada is to release government data on retail sales, the foremost indicator of consumer spending, which accounts for the majority of overall economic activity.
Also Wednesday, the U.S. is to produce industry data on existing home sales, a leading indicator of economic health, as well as the treasury currency report and data on crude oil stockpiles. The data can be a big market mover for the loonie due to the size of Canada’s energy sector.
Thursday, December 22
The U.S. is to publish its weekly report on initial jobless claims, a leading indicator of economic health. The country is also to produce revised data on third quarter GDP, while the University of Michigan is to release revised data on consumer sentiment and inflation expectations.
Friday, December 23
Later in the day, Canada is to produce its monthly report on GDP growth.
The U.S. is to round up the week with official data on durable goods orders, a leading indicator of production as well as data on personal spending income, personal spending and new home sales.
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