The euro rallied against the dollar and the yen on Friday boosted by hopes that the worst of the crisis in the euro zone has passed, while the yen fell further against the euro and the dollar after Japanese government officials said the currency still had room to weaken. The euro rose to its highest level against the dollar since February 29 and hit a 21-month high against the yen after the European Central Bank said 278 euro zone banks are to repay EUR137.2 billion in central bank loans next week, indicating that liquidity pressure in the bloc has eased. The euro also found support after a report showed that Germany’s Ifo index of business confidence improved to a seven-month high of 104.2 this month from 102.4 in December, compared to expectations for a reading of 103.
The JPY hit its lowest level against the euro since April 11, 2011 and hit more than two-and-a-half year lows against the dollar after Japan’s Deputy Economy Minister Yasutoshi Nishimura said an exchange rate of 100 yen to the dollar would not a be a concern to the government. On Tuesday the Bank of Japan said that was adopting a 2% inflation target and agreed to an “open-ended” commitment to asset purchases beginning next year, following political pressure from Prime Minister Shinzo Abe government to step up efforts to combat deflation.
The pound hit multi-month lows against the dollar and the euro after British Prime Minister David Cameron announced a potential referendum on Britain’s membership of the European Union, while concerns over the faltering economic recovery also weighed. The Canadian dollar ended the week lower against the U.S. dollar after unexpectedly weak inflation data on Friday reinforced expectations that that the Bank of Canada would hold back from hiking interest rates. The data came two days after the BoC said rate hikes were less imminent, citing a weaker inflation outlook.
Looking Ahead:
Monday, January 28
The euro zone is to release official data on M3 money supply and private loans. The U.S. is to produce government data on durable goods orders, as well as private sector data on pending home sales. Later in the day, New Zealand is to publish official data on the trade balance.
Tuesday, January 29
Australia is to publish an index of leading economic indicators compiled by the Conference Board, while the National Australia Bank is to release its index of business confidence. In the euro zone, the Gfk consumer climate index is to be published. Later Tuesday, the Conference Board is to publish a report on U.S. consumer confidence, while Case-Shiller is to release a report on U.S. house price inflation. In addition, New Zealand is to produce official data on building consents.
Wednesday, January 30
Japan is to publish official data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity. Switzerland is to release the KOF economic barometer, which is designed to predict the direction of the economy over the subsequent six months. In the euro zone, Spain is to publish preliminary data on fourth quarter gross domestic product, the broadest indicator of economic activity and the leading measure of the economy’s health. The U.K. is to release official data on net lending to individuals and mortgage approvals. The U.S. is to release data on private sector payrolls compiled by payroll processing firm ADP. The U.S. is also to release preliminary data on fourth quarter economic growth and weekly government data on crude oil stockpiles. Later in the trading day, the Federal Reserve is to announce its federal funds rate and publish its closely watched rate statement. The Reserve Bank of New Zealand is to announce its official cash rate and publish its rate statement.
Thursday, January 31
Japan is to produce preliminary data on industrial production as well as data on manufacturing activity and average cash earnings. Australia is to release official data on import prices and private sector credit. In the euro zone, Germany is to publish preliminary data on consumer inflation as well as data retail sales and the change in the number of unemployed. France is to release official data on consumer spending. The U.K. is to release industry data on house price inflation. Canada is to publish monthly data on gross domestic product, the broadest indicator of economic activity and the leading measure of the economy’s health. The U.S. is to release the weekly government report on initial jobless claims, as well as data on personal spending and manufacturing activity in Chicago.
Friday, February 1
Japan is to release official data on consumer spending, which accounts for the majority of overall economic activity. Australia is to produce official data on producer price inflation. China is to release government data on manufacturing activity, as well as a revised private sector report on manufacturing activity. Switzerland is to publish its SVME PMI, a leading indicator of economic health. The euro zone is to publish preliminary data on consumer inflation in the bloc, as well as official data on the unemployment rate. The U.K. is to release data on manufacturing activity, a leading indicator of economic health. The U.S. is to release the closely watched government report on nonfarm payrolls and the unemployment rate, while the Institute of Supply Management is to publish a report on manufacturing activity. In addition, the University of Michigan is to release revised data on consumer sentiment.
EasyForexNews Research Team