Forexpros – Last week saw the U.S. dollar slip against most of its major counterparts amid mounting worries over a potential U.S. sovereign debt default, while lingering concerns over the euro zone’s debt crisis pressured the single currency lower.
Ratings agency Standard & Poor’s said late Thursday that the U.S. faced a 50% chance of a credit rating downgrade within the next 90 days, citing the political debate over raising the country’s USD14.3 trillion debt ceiling before the August 2 deadline.
The warning came a day after rival Moody’s Investors Service said it put the U.S. government’s Aaa bond rating on review for possible downgrade due to a “small but rising risk” of a short-lived default.
At a press conference Friday, President Barack Obama urged for a “big” deficit-cutting deal, but said he and Congress should at least get a “down payment” on cutting the budget soon.
In Europe, results from the European Banking Authority stress-tests showed that eight banks out of the region’s 90 top lenders failed, with a combined capital shortfall of EUR2.5 billion.
The EBA said 16 banks narrowly passed the stress tests. Of the banks that failed the tests, five were in Spain, two in Greece and one in Austria, while all of the region’s biggest firms passed the test.
Meanwhile, Greece and Ireland both had their credit ratings cut to junk status earlier in the week, while yields on Italian government bonds surged to euro-lifetime highs, stoking fears over sovereign debt contagion in the single currency bloc.
The yen and the Swiss franc posted gains against the greenback and the euro as investors bought the safe-haven currencies as a hedge against risks to both the dollar and the euro.
The pound also performed strongly against the dollar and the single currency as investors sought an alternative amid the shaky outlook for the U.S. and the euro zone.
Elsewhere, New Zealand’s dollar ended the week close to a 26-year high against the greenback, while its Canadian counterpart climbed to a nine-week high after commodity prices advanced.
In the week ahead, euro zone finance ministers are to meet Thursday to focus on “the financial stability of the euro area as a whole and the future financing of the Greek program,” according to the president of the European Council, Herman Van Rompuy.
Markets will also be paying close attention to any developments in regards to the U.S. debt ceiling talks as well as a congressional testimony from Federal Reserve Chairman Ben Bernanke.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets.
Monday, July 18
New Zealand is to publish government data on consumer price inflation, which accounts for a majority of overall inflation. Meanwhile, Australia is to release official data on new vehicle sales, an important indicator of consumer confidence. Also Monday, markets in Japan are to remain closed for a public holiday.
The U.K. is to release industry data on house price inflation, a leading indicator of the housing industry’s health.
Later in the day, Canada is to publish official data on foreign securities purchases, while the U.S. is to publish a government report on the balance of domestic and foreign investments.
Tuesday, July 19
The Reserve Bank of Australia is to publish the minutes of the July monetary policy meeting. The minutes give investors a detailed insight into the economic conditions that influenced the rate setting decision.
In the euro zone, the ZEW Centre for Economic Research is to publish a report on German economic sentiment, a leading indicator of economic health.
Later in the day, the Bank of Canada is to announce its overnight rate. The announcement will be followed by the bank’s rate statement which discusses the economic outlook and offers clues on the outcome of interest future decisions.
Also Tuesday, the U.S. is to publish government data on building permits, an excellent gauge of future construction activity, as well as a report on housing starts.
Wednesday, July 20
Australia is to publish a report on a leading index, designed to predict the direction of the economy based on nine economic indicators.
The euro zone is to release official data on German producer price inflation, a leading indicator of consumer inflation, as well as a report on consumer confidence.
In the U.K., the Bank of England is to publish the minutes of July’s meeting of the monetary policy committee. The minutes give investors a detailed insight into the economic conditions that influenced the rate setting decision.
Later in the day, the BoC is to release its monetary policy report. The report will be followed up by a press conference to discuss the previous day’s interest rate decision.
Canada is also to publish an index of leading economic indicators, as well as official data on wholesale sales, a leading indicator of consumer spending.
Meanwhile, the U.S. is to publish an industry report on existing home sales, a leading indicator of economic health, as well as government data on crude oil inventories.
Thursday, July 21
Japan is to publish official data on its trade balance, the difference in value between imported and exported goods and services over the month. Elsewhere, Australia is to publish a report on business confidence.
Switzerland is to publish government data on its trade balance, while later in the day the ZEW Centre for Economic Research is to publish a report on Swiss economic expectations, a leading indicator of economic health.
The euro zone is to release preliminary data on activity in the manufacturing and service sectors, while France and Germany are to publish individual reports. The euro zone is also to publish official data on its current account.
Elsewhere, the U.K. is to produce government data on retail sales, the primary gauge of consumer spending, which accounts for the majority of overall economic activity, as well as a report on public sector borrowing.
In addition, the U.S. is to release a weekly government report on initial jobless claims, while the Federal Reserve Bank of Philadelphia is to produce a report on manufacturing activity, a leading indicator of economic health.
Also Thursday, Fed Chairman Bernanke is to testify on the Dodd Frank Act Anniversary, in Washington DC.
Friday, July 22
Australia is to produce official data on import prices, which contribute to overall inflation.
The euro zone is to publish official data on industrial new orders, a leading indicator of production. Meanwhile, the Ifo Institute for Economic Research is to produce data on German business climate, a leading indicator of economic strength.
Canada is to round up the week with official data on consumer price inflation, which accounts for a majority of overall inflation as well as government data on retail sales, the primary gauge of consumer spending.
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