Forexpros – Last Friday saw the U.S. dollar fall sharply against its major counterparts as signs that European Union leaders are moving closer to an agreement to contain the debt crisis in the region boosted demand for higher yielding assets.
The euro found support after German officials said Friday that there were several possible ways of involving the International Monetary Fund in expanding the capacity of the euro zone’s bailout fund, the European Financial Stability Facility.
EU leaders continued to hold talks over the weekend to work out a plan to recapitalize the region’s banks, bolster the firepower of the EFSF and restructure Greek sovereign debt.
EU leaders were expected to agree on a comprehensive response to the two-year old sovereign-debt crisis at a summit Sunday or at a follow-up meeting on Wednesday.
The greenback was also hit after Federal Reserve Vice Chairman Janet Yellen said that a third round of large-scale securities purchases might be warranted to prop up the U.S. economy, boosting speculation over further easing.
Elsewhere Friday, the greenback fell to a record low against the yen, before rapidly trimming losses, after Japan’s government approved an expansion of the JPY12 trillion package of measures already in place to counter the effects of the persistently strong yen on the country’s largely export driven economy.
Japanese Prime Minister Yoshihiko Noda said he expected the plan to “help prevent industrial hollowing out and ward off economic downside risks.”
Investors have interpreted the measures as an acknowledgement that Japan’s government has become resigned to the yen’s strength after efforts to weaken the currency have failed.
The pound rallied to a six-week high against the greenback on Friday, but the outlook for sterling remained clouded after the minutes of the Bank of England’s October policy meeting indicated that further quantitative easing may be needed to prop up the ailing U.K. economy.
Earlier in the week, official data showed that the annualized rate of inflation in the U.K. jumped to a record high last month, fueling concerns that the economy may experience an extended period of high inflation and low growth.
Meanwhile, the Australian and New Zealand dollars ended the week largely unchanged against the greenback, while the Canadian dollar posted its third successive week of gains against the greenback as risk appetite strengthened.
Ahead of the coming week investors will be closely watching developments in the euro zone, amid hopes for a breakthrough on dealing with the deepening debt crisis in the region. Markets will also be eyeing Thursday’s U.S. data on third quarter economic growth in order to gauge the strength of the U.S. recovery. In addition, Canada, New Zealand and Japan are all to announce their benchmark interest rates.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets.
Monday, October 24
Japan is to publish official data on the trade balance, the difference in value between imports and exports over the month. Meanwhile, Australia is to produce government data on producer price inflation, which is a leading indicator of consumer inflation.
The euro zone is to release preliminary data on activity in the manufacturing and services sectors, while France and Germany are also to publish individual reports. The euro zone is also to publish official data on industrial new orders, a leading indicator of production.
Later in the day, New Zealand is to release government data on consumer price inflation, which accounts for a majority of overall inflation.
Tuesday, October 25
In the euro zone, European Central Bank President Jean-Claude Trichet is to speak; his comments will be closely watched for clues to the future possible direction of monetary policy. The euro zone is also to publish a report on German consumer climate an important indicator of economic health.
The U.K. is to publish official data on the current account as well as an industry report on mortgage approvals. In addition, Bank of England Governor Mervyn King is to speak; his comments will be closely watched for any indication of the future possible direction of monetary policy.
Elsewhere in Europe, Switzerland’s UBS bank is to produce its consumption indicator, an important indicator of economic health.
Australia is to publish an index of leading economic indicators, designed to forecast the future direction of the economy.
The Bank of Canada is to announce its benchmark interest rate; the announcement will be followed by the bank’s rate statement, which contains important insights into current economic conditions. In addition, Canada is to publish official data on retail sales, the foremost indicator of consumer spending, which accounts for the majority of overall economic activity.
Later Tuesday, the U.S. is to publish industry data on house price inflation as well as a report on consumer confidence, which is a leading indicator of consumer spending.
Wednesday, October 26
New Zealand is to produce a report on business confidence, a leading indicator of economic health. The country is also to publish official data on the trade balance. Later in the day, the Reserve Bank of New Zealand is to announce its benchmark interest rate; the announcement will be followed by the bank’s rate statement, which contains important insights into current economic conditions.
Meanwhile, Australia is to publish official data on consumer price inflation, which accounts for the majority of overall inflation.
The U.K. is to release a report on industrial order expectations, an important indicator of economic health. Later in the day, BoE policymaker Adam Posen is to speak at an event in New York.
In the euro zone, European Union leaders are to hold a one-day economic summit to discuss measures to stem the spreading debt crisis in the single-currency bloc.
The U.S. is to release government data on durable goods orders, a leading indicator of production. The country is also to publish official data on new home sales and crude oil stockpiles.
Also Wednesday, the BoC is to publish its monetary policy report. BoC Governor Mark Carney will hold a press conference to discuss the previous day’s interest rate decision.
Thursday, October 27
Japan is to publish government data on retail sales, the foremost indicator of consumer spending, which accounts for the majority of overall economic activity. Meanwhile, the Bank of Japan is to announce its benchmark interest rate. Following the announcement, BoJ Governor Masaaki Shirakawa will hold a press conference to discuss monetary policy.
The euro zone is to publish official data on M3 money supply, while Germany is to release preliminary data on consumer price inflation. Elsewhere, the U.K. is to produce industry data on retail sales.
The U.S. is to publish preliminary data on third quarter gross domestic product, the broadest measure of economic activity and the primary gauge of the economy’s health, as well as the GDP price index, the broadest measure of inflation. The country is also to publish its weekly data on initial jobless claims and an industry report on pending home sales.
Friday, October 28
Japan is to publish official data on household spending, which accounts for the majority of overall economic activity. The country is also to produce government data on consumer price inflation and the unemployment rate, as well as preliminary data on industrial production.
The U.K. is to publish a report on consumer confidence, while Switzerland is to publish the KOF economic barometer, which is designed to predict the direction of the economy over the following six months. Elsewhere, the euro zone is to publish data on French consumer spending.
The U.S. is to round up the week with a flurry of data on personal income, personal spending, employment costs and consumer prices. Meanwhile, the University of Michigan is to publish revised data on consumer sentiment and inflation expectations.
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