Forexpros – The euro was down against the U.S. dollar on Friday, paring some of the week’s gains as ongoing fears over the financial crisis in the single currency bloc overshadowed stronger-than-expected U.S. employment data.
The euro initially rose to an eight-day high after official data showed that the U.S. unemployment rate dropped unexpectedly to a two-and-a-half year low of 8.6% in November, as the U.S. economy created 120,000 new jobs.
The euro was also supported by speculation that the European Central Bank may lend as much as EUR270 billion to the International Monetary Fund to support troubled euro zone economies.
But the single currency turned lower amid skepticism over whether the euro zone’s bailout fund, the European Financial Stability Facility, can contain the debt crisis and amid speculation over a potential downgrade of Spain.
On Thursday, ECB President Mario Draghi indicated that the bank was ready to take stronger action to fight the region’s debt crisis if political leaders can agree on much tighter budget controls at Friday’s European Union summit.
The dollar fell sharply against all of its major counterparts on Wednesday, after six major central banks announced a coordinated action to enhance the capacity to provide liquidity to the global financial system.
In a joint statement, the Federal Reserve, the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank said they had agreed to lower dollar swap rates to prevent a lack of liquidity in the global financial system.
The surprise announcement came after China said that it plans to cut banks’ reserve requirement ratios in an effort to help boost liquidity and support the world’s second largest economy amid global market turmoil.
Elsewhere, Japanese Finance Minister Jun Azumi said Friday that he would not hesitate to intervene in the currency exchange market if he deemed it necessary to counter speculation-driven rises in the yen.
In the week ahead, investors will be closely watching the ECB’s policy meeting on Thursday, amid expectations for a 0.5% rate cut by the bank. Meanwhile, EU leaders are to hold a summit meeting to address the region’s crisis on Friday.
Ahead of the coming week, Forexpros has compiled a list of these and other significant events likely to affect the markets.
Monday, December 5
Australia is to publish a report on the number of jobs advertized in newspapers and online, an important indicator of health in the housing market. The country is also to release industry data on service sector activity as well as government data on company operating profits.
The euro zone is to produce revised data on service sector growth, as well as data on investor confidence, an important indicator of economic health. In addition the single currency bloc is to publish official data on retail sales, the foremost indicator of consumer spending, which accounts for the majority of overall economic activity.
In the U.S., the Institute of Supply Management is to release a report on service sector activity, a leading indicator of economic health. The U.S. is also to publish government data on factory orders, a leading indicator of production.
Tuesday, December 6
The Reserve Bank of Australia is to announce it benchmark interest rate. The bank’s rate statement will be closely watched for its insights on the economic outlook. Australia is also to release data on the current account balance.
The U.K. is to publish industry data on retail sales, an important indicator of economic health. Meanwhile, Switzerland is to produce government data on consumer price inflation, which accounts for the majority of overall inflation, while the Swiss National Bank is to release its monthly report on foreign currency reserves.
The euro zone is to produce revised data on gross domestic product, while Germany is to publish official data on factory orders.
Also Tuesday, the Bank of Canada is to announce its benchmark interest rate. Canada is also to release official data on building permits, an excellent gauge of future construction activity, as well as the Ivey PMI, a leading indicator of economic health.
Wednesday, December 7
Australia is to release official data on third quarter GDP, the primary measure of economic activity and the foremost indicator of the economy’s health. Elsewhere, the Reserve Bank of New Zealand is to announce its benchmark interest rate. The bank’s rate statement will be closely watched for its insights on the economic outlook.
The U.K. is to publish official data on manufacturing and industrial production, leading indicators of economic health. Meanwhile, the National Institute of Economic and Social Research is to publish its quarterly GDP estimate.
In the euro zone, Germany is to produce government data on industrial production, a leading indicator of economic health.
Later in the day, the U.S. is to release government data on crude oil stockpiles.
Thursday, December 8
Japan is to release official data on core machinery orders, a leading indicator of production. The country is also to publish government data on the current account balance and bank lending.
Australia is to publish official data on employment change and the unemployment rate, a leading indicator of economic health.
In the U.K., the Bank of England is to announce its benchmark interest rate. The ECB is also to announce its benchmark interest rate; the bank’s post-policy meeting press conference will be closely watched for any clues to the possible future direction of monetary policy.
Canada is to publish official data on housing starts, as well as data on house price inflation, both leading indicators of economic health.
Also Thursday, the U.S. is to publish its weekly report on initial jobless claims, the nation’s earliest economic data.
Friday, December 9
Japan is to publish official data on manufacturing activity, as well as revised data on third quarter GDP.
In the euro zone, France is to produce official data on industrial production, a leading indicator of economic health. Meanwhile, European Union leaders are to hold an economic summit in Brussels to outline plans to enforce stricter budget rules across the euro zone and prevent the region’s debt crisis from worsening.
The U.K. is to publish official data on producer price inflation input, a leading indicator of consumer inflation, as well as data on the trade balance, the difference in value between imported and exported goods over the reported month.
Canada is also to release data on its trade balance as well as data on labor productivity, a leading indicator of inflation.
The U.S. is to round up the week with data on the trade balance, while the University of Michigan is to release preliminary data on consumer sentiment and inflation expectations, leading indicators of economic health.
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