The dollar hit fresh 14-month lows against the euro on Friday as U.S. jobs data reinforced expectations that the Federal Reserve would maintain its monetary easing program. The US Department of Labor said the economy added 157,000 jobs in December, slightly below expectations for a 160,000 increase, while the unemployment rate ticked up to 7.9% from 7.8% in November. November and December nonfarm payrolls figures were revised sharply higher to 247,000 and 196,000 respectively. The single currency also found support after data showed that manufacturing activity in the euro zone improved in January, while inflation and unemployment stabilized, underlining the view that the crisis in the region has turned a corner. The euro zone manufacturing purchasing managers’ index improved to 47.9 from 46.1 in December, still below the 50 mark that separates contraction from expansion but the slowest rate of contraction in 11 months. Meanwhile, separate reports showed that the rate of inflation in the euro zone fell to 2% in January from 2.2% in December, almost in line with the European Central Bank’s target, while the unemployment rate held steady at 11.7% last month. EUR/USD hit 1.3711 on Friday; the pair’s highest since mid-November 2011, before settling back at 1.3639. EUR/JPY hit a high of 126.97, the pair’s highest since April 2010, before settling at 126.55. The yen remained broadly weaker amid expectations that Japanese Prime Minister Shinzo Abe would keep up pressure on the Bank of Japan to implement more aggressive easing measures to combat deflation. USD/JPY hit 92.97 on Friday, before settling at 92.75, 1.16% higher for the day and up 2.52% for the week. The cable tumbled 1% against the dollar on Friday and hit 15-month lows against the euro as disappointing U.K. manufacturing data added to fears over the faltering economy. GBP/USD ended the week almost unchanged close to five-month lows at 1.5696, while EUR/GBP finished the week 1.44% higher at 0.8692.
In the week ahead, investors will be anticipating the outcome of upcoming policy meetings by the ECB, Bank of England and Reserve Bank of Australia, while U.S. and U.K. data on service sector activity will also be in focus.
Monday, February 4
Australia is to release official data on building approvals, an excellent indicator of future construction activity. In the euro zone, Spain is to produce government data on the change in the number of people unemployed. The U.K. is to publish a report on construction sector activity, a leading indicator of economic health. The U.S. is to release official data on factory orders, a leading indicator of production. Later Monday, New Zealand is to publish government data on labor costs, a leading indicator of consumer inflation.
Tuesday, February 5
Australia is to release official data on the trade balance, the difference in value between imports and exports, in addition to data on house price inflation. Meanwhile, the RBA is to announce its official cash rate and publish its rate statement. Markets in New Zealand are to remain closed for a national holiday. The U.K is to publish a report on service sector activity, a leading indicator of economic health, as well as industry data on retail sales. The euro zone is to produce official data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity, while Spain and Italy are to release data on service sector activity. Elsewhere in Europe, Switzerland is to publish government data on the trade balance. The Institute of Supply Management is to publish a report on U.S. service sector activity.
Wednesday, February 6
Australia is to produce official data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity. In the euro zone, Germany is to release official data on factory orders, a leading indicator of production. Canada is to publish its Ivey purchasing managers’ index, a leading indicator of economic health. The U.S. is to release government data on crude oil inventories. Also Wednesday, New Zealand is to release quarterly government data on the change in the number of people employed and the unemployment rate.
Thursday, February 7
Japan is to release official data on core machinery orders, a leading indicator of production. Australia is to release quarterly government data on the change in the number of people employed and the unemployment rate, as well as private sector data on business confidence. The Swiss National Bank is to publish a report on foreign currency reserves, which give an insight into the extent of the bank’s currency market operations. Switzerland is also to produce official data on consumer climate. The U.K. is to release government data on manufacturing and industrial production, as well as a report on the trade balance. Later in the day, the BoE is to announce its benchmark interest rate. In the euro zone, both Spain and France are to hold auctions of 10-year government bonds, while Germany is to release official data on industrial production. Meanwhile, the ECB is to announce its benchmark interest rate; the announcement is to be followed by a post-policy meeting press conference with President Mario Draghi. Canada is to publish a government report on building permits, as well as data on new house price inflation. The U.S. is to release the weekly government report on initial jobless claims.
Friday, February 8
Japan is to produce official data on the current account. Elsewhere, China is to publish official data on consumer inflation. The RBA is to publish its monetary policy statement, which gives insights into the bank’s perspective on the outlook for the economy. Switzerland is to release official data on the unemployment rate and retail sales. Later in the day, Canada is to publish government data on the change in the number of people employed and the unemployment rate, as well as data on the trade balance. The U.S. is to round up the week with official data on the trade balance.
EasyForexNews Research Team