Forexpros – The euro fell sharply against the U.S. dollar on Friday, as ongoing concerns over the debt crisis in the single currency bloc and an increasingly grim economic outlook saw the currency tumble more than 1.5%.
Preliminary data on Friday showed that the rate of inflation in the euro zone unexpectedly accelerated to 3% in September, up from 2.5% the previous month. The data dampened expectations that the European Central Bank would lower borrowing costs in an attempt to support growth in the single currency bloc.
The data came after a report showing that German retail sales slumped 2.9% in August, confounding expectations for a 0.4% decline.
The euro also weakened against the Swiss franc, even after Swiss National Bank President Philipp Hildebrand said the bank would enforce the cap against the euro with determination.
Earlier in the week, Germany’s parliament approved an expansion of the powers of the euro zone’s bailout fund, the European Financial Satiability Facility. The European Commission said the expanded rescue fund is set to be in place by mid-October.
In Greece, Prime Minister George Papandreou’s government continued to attempt to implement unpopular austerity measures, in order to meet fiscal requirements set out under the terms of its bailout agreement. International inspectors are currently in Athens to decide whether Greece should receive the next tranche of its EUR8 billion aid package.
Increased risk aversion also weighed heavily on commodity linked currencies, with the Canadian dollar closing the week at a more than one-year low against the greenback.
Meanwhile, New Zealand’s dollar declined after Standard & Poor’s followed Fitch Ratings in downgrading the country’s credit rating, citing concerns over New Zealand’s fiscal burden.
The greenback also found support after official data on Thursday showed that the U.S. economy grew slightly more than previously reported in the second quarter.
In its final estimate for the quarter, the Commerce Department said gross domestic product grew at annual rate of 1.3%, the up from the previously estimated 1.0%.
Another report on Friday showed that consumer spending in the U.S. rose 0.2% in August after a revised 0.7% increase the previous month.
In the coming week, markets will be closely watching the outcome of Thursday’s policy-setting meeting by the ECB as well as developments in Greece. Meanwhile, Friday’s data on U.S. non-farm payrolls will also be a major focus for the week.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets.
Monday, October 3
Japan is to produce official data on activity in the manufacturing and non-manufacturing sectors. Elsewhere, markets in Australia will remain closed for a bank holiday.
In the euro zone, markets in Germany are to stay shut for a public holiday. Meanwhile, Switzerland is to produce official data on retail sales, the primary gauge of consumer spending, which accounts for the majority of overall economic activity as well as a government report on manufacturing activity. The U.K. is to release data on manufacturing sector growth, a leading indicator of economic health.
Later in the day, the U.S. Institute of Supply Management is to publish data on manufacturing activity.
Tuesday, October 4
New Zealand is to publish a report on business confidence, a leading indicator of economic health. Meanwhile, Japan is to release official data on average earnings, which is closely correlated with consumer spending.
Australia is to produce a string of data, with reports on building approvals, an excellent gauge of future construction activity, the trade balance and commodity prices. In addition, the Reserve Bank of Australia is to announce its benchmark interest rate. The bank’s rate statement will be closely watched as it offers traders an insight into current and future economic conditions from the bank’s point of view.
In the euro zone, financial ministers are to hold a series of meeting in Brussels, to discuss the implementation of a permanent euro zone bailout facility. In addition, 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 U.K. is to publish official data on construction spending, while Bank of England policymaker David Miles is to speak later in the day.
Later Tuesday, the U.S. is to release official data on factory orders, a leading indicator of production, while Federal Reserve Chairman Ben Bernanke is to speak in Washington.
Wednesday, October 5
Australia is to publish official data on retail sales, as well as industry data on service sector growth, an important indicator of economic health.
The U.K. is to produce revised data on second quarter GDP, the broadest measure of economic activity and the primary gauge of the economy’s health. The country is also to release data on service sector activity as well as reports on the current account and business investment.
The euro zone is also to publish revised data on second quarter GDP, as well as official data on retail sales.
Later in the day, the U.S. is to release a report on non-farm payrolls, compiled by payroll processing firm ADP, which leads government data by two days. Meanwhile, the ISM is to produce a report on service sector activity, a leading indicator of economic health. The country is also to release government data on crude oil inventories.
Thursday, October 6
Switzerland is to publish official data on consumer price inflation, which accounts for a majority of overall inflation.
In the euro zone, Germany is to release official data on factory orders, a leading indicator of production. Later in the day, the ECB is to announce its benchmark interest rate. Traders will be closely watching the post-policy meeting press conference by the bank, to discuss the economic outlook and monetary policy. In addition, the BoE will be announcing its benchmark interest rate.
Elsewhere, Canada is to produce official data on building permits as well as a report on manufacturing activity, a leading indicator of economic health. Meanwhile, the U.S. is to release its weekly report on initial jobless claims.
Friday, October 7
The Bank of Japan is to announce its benchmark interest rate; the announcement will be followed by a closely watched press conference to discuss monetary policy in detail.
Switzerland is to release official data on the unemployment rate, an important indicator of economic health. Elsewhere, in the euro zone, Germany is to publish official data on industrial production, a leading indicator of economic health. The U.K. is to release government data on producer price inflation input, a leading indicator of consumer inflation.
Later in the day, 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 the monthly report on non-farm payrolls, which is a leading indicator of job creation. The country is also to publish official data on the unemployment rate and average hourly earnings.
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