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Forex - Weekly Outlook: January 22 - 26

Published 2018-01-21, 05:55 a/m
Updated 2018-01-21, 06:38 a/m
© Reuters.  Dollar ends week lower as U.S. government shutdown fears weigh

Investing.com - The dollar edged higher late Friday but ended the week near a three-year low against a basket of the other major currencies as fears over the prospect of a U.S. government shutdown weighed.

The dollar pushed higher amid hopes that a meeting between President Donald Trump and Senate Democratic leader Chuck Schumer would yield a last minute solution to avoid a shutdown.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, edged up 0.2% to 90.49 late Friday. It touched a low of 89.96 earlier, the weakest level since December 2014.

For the week, the index was down 0.4% and it has declined 1.46% so far in 2017.

The dollar has been pressured lower by the view that the global economic recovery will outpace U.S. growth and prompt other major central banks, including the European Central Bank to begin unwinding loose monetary policy at a faster pace.

The euro dipped, with EUR/USD slipping 0.12% to 1.2223, holding below Wednesday’s three-year high of 1.2322 ahead of the upcoming ECB meeting.

The euro has strengthened broadly since the minutes of the ECB’s December meeting published on Jan. 11 underlined expectations that policymakers are preparing to winding down their bond buying stimulus program this year.

The single currency has gained 1.88% against the greenback so far this year.

The dollar was lower against the yen, with USD/JPY falling 0.36% to 110.69, re-approaching Wednesday’s four-month lows of 110.18.

A tweak by the Bank of Japan to its bond buying program earlier this month sparked speculation about a pullback in its monetary stimulus scheme later this year.

Meanwhile, sterling slid against the dollar on Friday as weak UK retail sales figures clouded the outlook for the economy.

GBP/USD was down 0.28% to 1.3857, after rising as high as 1.3944 overnight, the highest level since Britain’s vote to exit the European Union in June 2016.

In the week ahead, investors will be focused on the outcome of monetary policy meetings by the ECB and the BoJ.

Market watchers will be looking ahead to data on fourth quarter growth from both the U.S. and the UK. Canadian inflation data will also be in focus after last week's rate hike by the country’s central bank.

The World Economic Forum in Davos and talks on the North American Free Trade Agreement will also be closely watched for developments.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.

Monday, January 22

Canada is to report on wholesale sales.

Tuesday, January 23

The Bank of Japan is to announce its benchmark interest rate and publish a rate statement which outlines economic conditions and the factors affecting the monetary policy decision. The announcement is to be followed by a press conference.

The UK is to release data on public sector borrowing.

The ZEW Institute is to report on German economic sentiment.

The first day of World Economic Forum meetings are due to take place in Davos, Switzerland.

Wednesday, January 24

The euro zone is to release data on manufacturing and service sector activity.

The UK is to publish its monthly jobs report.

The U.S. is to report on existing home sales.

Thursday, January 25

New Zealand is to report on consumer price inflation.

The Ifo Institute is to release data on German business climate.

The first day of World Economic Forum meetings are due to take place in Davos, Switzerland.

The ECB is to announce its latest monetary policy decision. The announcement is to be followed by a press conference with President Mario Draghi.

Canada is to release data on retail sales.

The U.S. is to produce reports on jobless claims and new home sales.

Friday, January 26

Financial markets in Australia will be closed for the Australia Day holiday.

The UK is to release preliminary data on fourth quarter economic growth.

Canada is to release what will be closely watched inflation data.

The U.S. is to round up the week with preliminary data on fourth quarter economic growth, as well as a report on durable goods orders.

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