11/03/2012
forex - Weekly outlook: March 12 -16
The U.S. dollar rose more than 1% against the euro and the yen on Friday, after data showed that U.S. employment increased robustly for a third consecutive month, dampening expectations for fresh monetary easing by the Federal Reserve.
The Department of Labor said the U.S. economy added 227,000 jobs in February after increasing by a revised 284,000 the previous month. The unemployment rate held steady at a three year low of 8.3%.
The strong data boosted the dollar as it diminished expectations for a fresh round of asset purchases by the Federal Reserve to help stimulate economic growth.
Against the euro, the dollar advanced 1.13%, with EUR/USD trading at 1.3122, while USD/JPY jumped 1.14% to hit an 11-month high of 82.47 by close of trade.
Earlier Friday, Greece announced that more than 85% of its private creditors had signed up to a debt swap deal, aimed at restructuring 53.5% of the country’s debt. The deal cleared the way for Athens to secure a second bailout worth EUR130 billion and avert a default.
But the euro came under pressure after the International Swaps and Derivatives Association said the debt swap constituted a “credit event” that would activate credit-default swaps, which designed to protect investors against losses on Greek sovereign debt.
The shared currency was also weighed by concerns over the economic outlook for the region after the European Central Bank revised down its forecast for growth in 2012 to a range of between minus 0.5% and 0.3% following Thursday’s policy meeting.
The central bank left its benchmark interest rate unchanged at 1% for the third consecutive month, in a widely expected decision.
Meanwhile, the yen remained broadly weaker after data on Thursday showed that Japan’s current account balance swung to a record deficit of JPY437.3 billion in January, prompting Bank of Japan Governor Masaaki Shirakawa to reiterate that the bank was prepared to loosen monetary policy again if needed to support the economy.
A separate report confirmed that Japan’s gross domestic product contracted by 0.2% in the last three months of 2011, in line with earlier estimates.
The yen was almost unchanged against the euro on Friday, with EUR/JPY closing down 0.02% at 108.22.
Elsewhere Friday, the pound fell sharply against the broadly stronger greenback, with GBP/USD tumbling 0.97% to close trading at a two-week low of 1.5673.
In the week ahead, investors will be continuing to watch developments in Greece, with the euro likely to remain under pressure after Friday’s ISDA ruling. Elsewhere, both the BoJ and the Swiss National Bank are to hold monetary policy meetings, while the U.S. is to publish official data on retail sales.
Ahead of the this week, we've has compiled a list of these and other significant events likely to affect the markets.
Monday, March 12
Japan is to produce government data on core machinery orders, a leading indicator of production. The country is also to publish official data on the corporate goods price index and household confidence.
Later in the day, the U.S. is to publish government data on the federal budget balance.
Tuesday, March 13
The BoJ is to announce its benchmark interest rate following its monetary policy meeting. The central bank will also hold a post-policy meeting press conference to discuss monetary policy. In addition, Japan is to release government data on tertiary industry activity, a key indicator of economic health.
Australia is to produce official data on home loans, a leading gauge of demand in the housing market, as well as a report on business confidence. Meanwhile, New Zealand is to publish industry data on house price inflation, a key indicator of the housing industry’s health.
The U.K. is to release industry data on house price inflation, as well as official data on the trade balance, which is the difference in value between imported and exported goods.
Switzerland is to produce government data on producer price inflation, an important gauge of consumer inflation.
In the euro zone, reports are to be released on the ZEW economic sentiment index for Germany and for the entire single currency bloc. Later in the day, ECB President Mario Draghi is due to speak. Meanwhile, euro zone finance ministers are scheduled to hold talks throughout the day.
The U.S. is to release government data on retail sales, the foremost indicator of consumer spending, which accounts for the majority of overall economic activity. The country is also to produce official data on business inventories, a signal of future business spending.
Also Tuesday, the Federal Reserve is to announce its benchmark interest rate; the announcement will be accompanied by the central bank’s rate statement.
Wednesday, March 14
Australia is to produce a report by the Westpac Banking Corporation on consumer sentiment, a leading indicator of consumer spending. Elsewhere, Japan is to release government data on manufacturing activity, followed by the BoJ’s monthly report.
The U.K. is to publish official data on claimant count change, the first indication of the employment situation, as well data on the country’s unemployment rate.
Elsewhere in Europe, Switzerland is to publish a report on the ZEW index of economic expectations, a key indicator of economic health.
The euro zone is to publish official data on consumer price inflation, which accounts for the majority of overall inflation, as well as data on industrial production, a leading indicator of economic health.
Canada is to publish official data on the country’s capacity utilization rate, a key indicator of consumer inflation.
Later in the day, the U.S. is to produce official data on the country’s current account, as well as data on import prices and crude oil stockpiles. In addition, Federal Reserve Chairman Ben Bernanke is also due to speak; his comments will be closely watched for clues to the future possible direction of monetary policy.
Thursday, March 15
Australia is to publish a report by the Melbourne Institute on inflation expectations, followed by official data on new motor vehicle sales, a sign of consumer confidence.
In Switzerland, the State Secretariat for Economic Affairs is to publish its quarterly forecast for economic growth. Meanwhile, the SNB is to announce its benchmark interest rate; the announcement will be accompanied by the bank’s rate statement, which contains valuable insights into economic conditions from the bank’s perspective.
The ECB is to publish its monthly bulletin, which reveals the statistical data that the bank’s Governing Board evaluated when making the latest interest rate decision.
Later Thursday, the U.S. is to release government data on producer price inflation, a leading indicator of consumer inflation, as well as official data on unemployment claims. The country is also to produce reports on manufacturing activity in New York and Philadelphia, as well as a government report on net long-term securities transactions.
Friday, March 16
The BoJ is to release the minutes of its policy-setting meeting from earlier in the week.
Elsewhere, Canada is to publish official data on foreign security purchases and on manufacturing sales, a leading indicator of economic health.
The U.S. is to round up the week with government data on consumer price inflation, followed by reports from the Federal Reserve on the capacity utilization rate and industrial production. In addition, the country is also to release preliminary reports by the University of Michigan on consumer sentiment and inflation expectations.
