Forexpros – The U.S. dollar ended the week sharply lower against the other major currencies on Friday, as investor confidence was buoyed by fresh hopes for steps to stem the debt crisis in the euro zone, while stronger-than-forecast U.S. jobs data also fuelled risk appetite.
The euro rallied against the greenback on Friday, after European Central Bank President Mario Draghi indicated Thursday that the bank would restart its bond buying program, to help lower Spanish and Italian borrowing costs.
The euro weakened broadly on Thursday, amid initial disappointment after Draghi indicated that any intervention by the ECB to calm bond markets would not come before September.
Draghi also said that any steps by the ECB were conditional on euro zone governments experiencing difficulty on bond markets activating the bloc’s bailout funds to purchase government bonds and accepting strict conditions and supervision.
In the U.S, the Department of Labor said the economy added 163,000 jobs in July, the biggest increase since February and outstripping expectations for an increase of 100,000, following a downwardly revised increase of 64,000 the previous month.
However, the U.S. unemployment rate unexpectedly ticked up to 8.3%, from 8.2% in the preceding month, keeping alive speculation over further monetary stimulus from the Federal Reserve.
On Wednesday, the U.S. central bank refrained from implementing fresh easing measures following its policy meeting, but the Fed said economic growth had slowed in the first half of the year and reiterated that it stood ready to provide additional stimulus as necessary.
The yen weakened against the greenback on Friday, amid speculation that the Bank of Japan may ease monetary policy at its next meeting, after Japanese officials reiterated concerns over the currency’s appreciation.
In the week ahead, market participants will continue to keep a close eye on developments in the euro zone, as investors continue to digest the implications of the ECB’s recent decisions.
Markets will also be paying close attention to speeches by Fed Chairman Ben Bernanke on Monday and Tuesday, amid ongoing speculation over the possibility of more easing from the U.S. central bank.
Elsewhere, both the BoJ and the Reserve Bank of Australia are to hold monetary policy meetings.
Ahead of the coming week, Forexpros has compiled a list of these and other significant events likely to affect the markets.
Monday, August 6
Markets in Australia are to remain closed for a national holiday. The country is to release a report on job advertisements, an important indicator of demand in the labor market.
The euro zone is to produce a report on investor confidence, an important indicator of economic health.
Markets in Canada are to remain closed for a bank holiday. In the U.S. Fed Chairman Ben Bernanke is to speak; his comments will be closely watched for any indications of the future possible direction of monetary policy.
Tuesday, August 7
The RBA is to announce its benchmark interest rate. The announcement is to be accompanied by the bank’s rate statement, which outlines the reasons for the bank’s policy decision and discusses the economic outlook.
New Zealand is to publish official data on labor costs, a leading indicator of consumer inflation.
Switzerland is to release government data on consumer price inflation, which accounts for the majority of overall inflation. In addition, the Swiss National Bank is to release a report on foreign currency reserves, which give an important insight into the central bank’s currency market operations.
In the euro zone, Italy is to release official data on second quarter gross domestic product, the broadest measure of economic activity and the foremost indicator of the economy’s health. Elsewhere, Germany is to produce official data on factory orders, a leading indicator of production.
The U.K. is to publish official data on manufacturing and industrial production, leading indicators of economic health. The country is also to publish industry data on retail sales.
Canada is to release government data on building permits, an excellent gauge of future construction activity, as well as the Ivey purchasing managers’ index, a leading indicator of economic health.
Later Tuesday, Fed Chairman Ben Bernanke is to speak at an event in Washington DC.
Wednesday, August 8
Japan is to release official data on the current account, which is closely linked to currency demand. Australia is to produce official data on home loans, a leading indicator of demand in the housing market.
Switzerland is to publish government data on consumer climate, a leading indicator of consumer spending.
The Bank of England is to publish its inflation report, which gives investors a valuable insight into the bank’s view of economic conditions and inflation.
In the euro zone, Germany is to hold an auction of 10-year government bonds and publish official data on industrial production, a leading indicator of economic health.
The U.S. is to release government data on labor costs and productivity, leading indicators of consumer inflation. The country is also to release official data crude oil stockpiles.
Thursday, August 9
Both Australia and New Zealand are to produce government data on employment change and the unemployment rate, leading indicators of economic health.
Japan is to publish official data on core machinery orders, while the BoJ is to announce its benchmark interest rate. The announcement is to be accompanied by the bank’s rate statement, which outlines the reasons for the bank’s policy decision and discusses the economic outlook.
The ECB is to publish its monthly bulletin, which gives a detailed analysis of current and future economic conditions from the bank’s perspective.
The U.K. is to release official data on the trade balance, the difference in value between imported and exported goods.
Elsewhere Thursday, Canada is to release official data on housing starts, a leading indicator of economic health, as well as data on house price inflation and the trade balance.
The U.S. is to publish its weekly report on initial jobless claims and data on the trade balance.
Friday, August 10
The RBA is to release its statement on monetary policy, which gives a valuable insight into the bank’s view of economic conditions and inflation.
The U.K. is to publish data on producer price inflation input, a leading indicator of consumer inflation.
Later Friday, Canada is to produce government data on employment change and the unemployment rate, leading indicators of economic health.
The U.S. is to round up the week with official data on import prices and the federal budget balance.
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