The yen was lower against the dollar and the euro on Friday after a draft statement by the Group of 20 nations avoided singling Japan out for criticism over the recent weakness of its currency. The G20 pledged that members would “refrain from competitive devaluation” and said that risks to the world economy had receded but growth remained too weak and unemployment too high. The yen was higher against the dollar and the euro earlier in the week after a statement by the G7 indicated concern over excessive movement in value of the yen. Investors were anticipating the announcement of the next governor of the Bank of Japan after Governor Masaaki Shirakawa said earlier this month that he plans to step down on March 19, three weeks earlier than expected. On Thursday, the BoJ kept monetary policy unchanged, in a widely expected decision. Separately, official data showed that Japan’s economy contracted by 0.1% in the fourth quarter, compared to expectations for an uptick of 0.1%. USD/JPY hit a high of 93.84 on Friday, before settling at 93.50, 0.67% higher for the day and 0.74% lower for the week. EUR/JPY hit a session high of 125.28 and settled at 124.93, up 0.68% for the day and down 1.04% for the week.
The euro remained under pressure against the dollar on Friday one day after official data showed that euro zone gross domestic product contracted by 0.6% in the three months to December, compared to expectations for a 0.4% decline. It was the fastest rate of decline since 2009 and marked a third consecutive quarter of contraction. Germany’s economy contracted by 0.6% in the in the fourth quarter, more than expectations for a 0.5% drop on declining exports and investment. EUR/USD hit a session low of 1.3307 before settling at 1.3362 by close of trade, dipping 0.01% on the day and 0.30% lower for the week.
The pound fell to six and a half month lows against the dollar on Friday after official data showed that U.K. retail sales dropped 0.6% in January as a result of heavy snow, confounding expectations for a 0.4% increase. The data came after the Bank of England cut its outlook for growth in Wednesday’s quarterly inflation report and said inflation would remain above target until early 2016. GBP/USD hit a low of 1.5461 on Friday, the pair’s lowest since July 25, before settling back at 1.5516, 0.16% higher for the day but down 0.90% for the week.
In the week ahead investors will be awaiting:
Monday, February 18
Australia is to release official data on new vehicle sales, a leading indicator of investor confidence. The euro zone is to release official data on the current account. The U.K. is to produce industry data on house price inflation. Markets in the U.S. are to remain closed for the President’s Day holiday.
Tuesday, February 19
The BoJ is to release monetary policy meeting minutes, which contain important insights into economic conditions from the Bank’s perspective. Elsewhere, the Reserve Bank of Australia is to publish its monetary policy meeting minutes. In the euro zone, the ZEW Institute is to release its closely watched index of German economic sentiment, a leading indicator of economic health. Canada is to produce official data on wholesale sales, a leading indicator of consumer spending, as well as data on foreign securities purchases. Later in the day, New Zealand is to release official data on producer price inflation, a leading indicator of consumer inflation.
Wednesday, February 20
Japan is to publish official data on the trade balance, the difference in value between imports and exports. Australia is to release official data on the wage price index, as well as two indexes of leading economic indicators. Elsewhere, Reserve Bank of New Zealand Governor Graeme Wheeler is to speak; his comments will be closely watched for any indications on the future possible direction of monetary policy. In the euro zone, Germany is to produce official data on producer price inflation, while both Germany and France are to hold auctions of 10-year governments bonds. The U.K. is to publish official data on the change in the number of people claiming unemployment benefits and the unemployment rate. Meanwhile, the BoE is to publish its monetary policy meeting minutes. Elsewhere in Europe, Switzerland is to publish a report on ZEW economic expectations. Later Wednesday, the U.S. is to release official data on building permits, a strong indicator of future construction activity, as well as data on housing starts. The U.S. is also to publish official data on producer prices, while the Federal Reserve is to release the minutes of its most recent policy meeting.
Thursday, February 21
Switzerland is to publish official data on the trade balance, the difference in value between imports and exports. The euro zone is to release closely watched preliminary data on manufacturing and service sector activity, while Germany and France are also to publish individual reports. In addition, Spain’s Treasury is to auction 10-year government bonds. The U.K. is to release official data on public sector net borrowing as well as a report on industrial order expectations. The U.S. is to release official data on consumer price inflation as well as the weekly government report on initial jobless claims. The U.S. is also to publish industry data on existing home sales, a report on manufacturing activity in Philadelphia and official data on crude oil stockpiles.
Friday, February 22
RBA Governor Glenn Stevens is to testify before a parliamentary committee on monetary policy in Canberra; his comments will be closely watched for any indications on the future possible direction of monetary policy. In the euro zone, the Ifo Institute is to publish a report on German business climate, a leading indicator of economic health. Canada is to round up the week with official data on consumer price inflation and retail sales.
EasyForexNews Research Team