The USD ended the week at highs against the yen on Friday, amid expectations for more easing by the Bank of Japan, while the euro ended the week lower amid renewed concerns over the economic outlook for the euro zone. The yen fell below 90.00 to the dollar for the first time since mid-June 2010 on Friday amid expectations that the BoJ will implement more aggressive easing measures at its upcoming policy meeting on Tuesday in response to growing political pressure from Prime Minister Shinzo Abe to step up efforts to combat deflation. The euro came under pressure as data indicated that the euro zone economy would struggle to recover in 2013. The Bank of Italy said Friday that the country’s economy would contract by 1% this year. Earlier in the week, Germany’s Economy Ministry cut its forecast for growth to 0.4% in 2013, down from its previous forecast for 1% growth. Meanwhile, data showing that China’s economy expanded more-than-forecast in the fourth quarter was overshadowed by weaker-than-forecast data on U.S. consumer confidence and U.K. retail sales. Beijing said the economy expanded by 7.9% year-on-year in the three months to December, above expectations for 7.8% growth. Safe haven demand received a boost after data showed that the University of Michigan’s U.S. consumer confidence index unexpectedly dropped from 72.9 to 71.3 in January, its lowest level since December 2011, compared to expectations for an improvement to 75.0. Consumer sentiment was hit by ongoing concerns over the U.S. debt ceiling debate. The cable hit nine-week lows against the dollar on Friday as fears over a triple-dip recession intensified after official data showed that U.K. retail sales dropped 0.1% in December, missing expectations for a 0.2% increase. In the week ahead, investors will be closely watching the outcome of Tuesday’s BoJ policy meeting. Market participants will also be awaiting Tuesday’s ZEW report on German economic sentiment amid concerns over the outlook for the euro zone’s largest economy. Elsewhere, the U.K. is to release data on fourth quarter economic growth on Friday.
Monday, January 21
The U.K. is to release industry data on house price inflation, a leading indicator of demand in the housing sector. In the euro zone, the euro group of finance ministers is to hold talks on a range of financial issues in Brussels. Meanwhile, Germany is to release official data on producer price inflation. Canada is to release official data on wholesale sales, a leading indicator of consumer spending. Markets in the U.S. are to remain closed on Monday for Martin Luther King Day.
Tuesday, January 22
The BoJ is to announce its benchmark interest rate. The rate announcement is to be accompanied by the bank’s rate statement, which contains important insights into current and future economic conditions from the bank’s perspective. The central bank is to hold a press conference to discuss the monetary policy decision after the rate announcement. The euro group of finance ministers is to hold a second day of talks in Brussels. Elsewhere in the euro zone, the ZEW Institute is to release its closely watched index of German economic sentiment, a leading indicator of economic health. The U.K. is to produce official data on public sector net borrowing, and hold an auction of 10-year government bonds. The country is also to release private sector data on industrial orders. Canada is to produce official data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity. The U.S. is to publish private sector data on existing home sales, a leading indicator of economic health. The World Economic Forum is to begin its annual meeting in Davos, Switzerland.
Wednesday, January 23
Australia is to release official data on consumer price inflation, which accounts for a majority of overall inflation. The U.K. is to produce official data on the monthly change in the number of people claiming unemployment benefits and the unemployment rate, a leading indicator of economic health. In addition, the Bank of England is to publish the minutes of its most recent policy meeting. The ZEW Institute is to release a report on economic expectations in Switzerland, a leading indicator of economic health. The Bank of Canada is to announce its benchmark interest rate. The rate announcement is to be accompanied by the bank’s rate statement, which contains important insights into current and future economic conditions from the bank’s perspective. The central bank is to hold a press conference to discuss the monetary policy decision after the rate announcement. The U.S. is to release government data on crude oil stockpiles.
Thursday, January 24
Japan is to publish official data on the trade balance, the difference in value between imports and exports. Elsewhere, China is to release the HSBC manufacturing index, a leading indicator of economic health. The euro zone is to produce official data on the current account and preliminary data on manufacturing and service sector activity, while Germany and France are also to release individual reports. In addition Spain is to publish official data on the unemployment rate. The U.K. is to release private sector data on mortgage approvals as well as industry data on retail sales. The U.S. is to publish the weekly government report on initial jobless claims, as well as preliminary data on manufacturing activity.
Friday, January 25
Japan is to release government data on consumer inflation, which accounts for the majority of overall inflation. Meanwhile, the BoJ is to publish the minutes of its most recent policy meeting. In the euro zone, the Ifo Institute is to publish a report on German business climate, a leading indicator of economic health. The U.K. is to produce preliminary data on fourth quarter gross domestic product, the broadest indicator of economic activity and the leading measure of the economy’s health. Canada is to publish official data on consumer price inflation, while the U.S. is to round up the week with government data on new homes sales, a leading indicator of economic health.
EasyForexNews Research Team