Forexpros – The euro pulled away from a two-year low against the U.S. dollar on Friday after Chinese economic growth figures met expectations, but the single currency remained vulnerable amid sustained concerns over the lack of progress in tackling the debt crisis in the euro area.
The euro found support after data showed that China’s gross domestic product expanded 7.6% in the second quarter, in line with expectations.
Elsewhere, the commodity linked Australian and New Zealand dollars rallied against the greenback following the data, as concerns over a hard landing in the world’s second largest economy eased.
The euro had dropped to its lowest level in two years against the greenback earlier in the session after ratings agency Moody’s downgraded Italy’s sovereign debt rating late Thursday, citing doubts over the government’s ability to enact badly-needed reforms.
The pound was sharply higher against the greenback on Friday, bolstered by improved investor confidence and after the Bank of England announced a new GBP80 billion ‘funding for lending’ program, that will offer cheaper loans to households and businesses.
The pound was also supported by safe haven buying following the ratings cut on Italy by Moody’s.
Elsewhere, the yen edged higher against the greenback on Friday, as ongoing concerns over the euro zone debt crisis supported safe haven demand.
On Thursday, the Bank of Japan left interest rates unchanged following its policy meeting. The bank reaffirmed its commitment to steadily increasing the size of its asset-purchase program, but held back from announcing any immediate increase in the overall size of the program.
In the U.S., data on Friday showed that consumer confidence unexpectedly dropped to the lowest level in seven months in July.
The University of Michigan said its index of consumer sentiment fell to a seasonally adjusted 72.0, from 73.2 in June, confounding expectations for an increase to 73.4.
A separate report showed that U.S. producer price inflation ticked up 0.1% in July, against expectations for a 0.5% decline.
The data came after Wednesday’s minutes from the Federal Reserve’s June meeting showed that few policymakers believed more asset purchases would be necessary to support growth in the economy.
In the week ahead, investors will be focusing on testimony by Federal Reserve Chairman Ben Bernanke, amid speculation over the possibility of more quantitative easing from the central bank.
Ahead of the coming week, Forexpros has compiled a list of these and other significant events likely to affect the markets.
Monday, July 16
Markets in Japan are to remain closed for a national holiday.
The U.K. is to release an industry report on house price inflation, an important indicator of demand in the housing market. Elsewhere in Europe, Switzerland is to publish official data on industrial production, an important indicator of economic health.
The euro zone is to produce official data on consumer price inflation, which accounts for the majority of overall inflation.
Later in the day, Canada is to release government data on foreign securities purchases, which is closely linked to currency demand.
The U.S. is to publish official data on retail sales, the foremost indicator of consumer spending, which accounts for the majority of overall economic activity. The country is also to release official data on business inventories and manufacturing activity in New York.
Tuesday, July 17
New Zealand is to publish official data on consumer price inflation, which accounts for the majority of overall inflation. Meanwhile, the Reserve Bank of Australia is to publish the minutes of its July meeting, which outline the reasons for the monetary policy decision and discuss the economic outlook. Australia is also to release official data on new motor vehicle sales.
In the U.K., Bank of England Governor Mervyn King and other senior policymakers are to testify before Parliament’s Treasury Committee. The country is also to release official data on consumer price inflation.
In the euro zone, the ZEW Institute is to release reports on economic sentiment in Germany and the wider euro area.
The Bank of Canada 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. Canada is also to produce official data on manufacturing sales, a leading indicator of economic health.
Later Tuesday, the U.S. is to publish official data on consumer price inflation, as well as reports on the capacity utilization rate and industrial production. In addition, Federal Reserve Chairman Ben Bernanke is to testify on the on the bank’s monetary policy report before the Senate Banking Committee in Washington.
Wednesday, July 18
The BoJ is to release the minutes of its July policy meeting, which outline the reasons for the monetary policy decision and discuss the economic outlook. Australia is to publish an index of leading economic indicators.
The U.K. is to publish official data on claimant count change and the unemployment rate, while the BoE is also to publish the minutes of its July policy-setting meeting.
Switzerland is to publish a ZEW report on economic expectations, a key indicator of economic health.
The BoC is to release its monetary policy report. The report is to be followed by a press conference to discuss the recent interest rate decision.
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. The country is also to release government data on crude oil stockpiles.
Meanwhile, Federal Reserve Chairman Ben Bernanke is to testify for a second day on the on the bank’s monetary policy report before the Senate Banking Committee in Washington.
Thursday, July 19
Australia is to release a report on business confidence, an important indicator of economic health.
Switzerland is to publish official data on the trade balance, the difference in value between imports and exports, while the euro zone is to release official data on the current account.
The U.K. is to produce official data on retail sales, the foremost indicator of consumer spending, which accounts for the majority of overall economic activity.
Canada is to release official data on wholesale sales, a leading indicator of consumer spending.
Later Thursday, the U.S. is to publish government data on initial jobless claims, as well as reports on existing home sales and manufacturing activity in Philadelphia.
Friday, July 20
Australia is to release official data on import prices, which contribute to overall inflation.
In the euro zone, Germany is to publish official data on producer price inflation, a leading indicator of consumer inflation.
The U.K. is to release government data on public sector net borrowing, a leading indicator of economic health.
Canada is to round up the week with official data on consumer price inflation, which accounts for the majority of overall inflation.
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