Weekly Outlook: 2014, December 14 - 21

Forex Weekly Outlook Dec.15-19

The US dollar retraced some of the previous gains but managed to retrace the retracement as well. Japan’s Lower House Elections, UK inflation and employment data and the most important event: the last Fed decision for the year are the main highlights for this week. Follow along as we explore the Forex market movers.

The US consumer is certainly upbeat: US retail sales release showed Americans spent 0.7% more in November compared to the previous month and core sales followed suit. Also confidence is high, the highest since January 2007 according to UoM. This is partially attributed to the collapse in oil prices, which is hurting the Canadian dollar. In the euro-zone, the highly anticipated TLTRO fell short of predictions, strengthening the notion that QE is coming to the old continent. The antipodean currencies took different directions: the Aussie got a target of 0.75 from the central bank, while the New Zealand’s central bank seemed upbeat. Volatility continues being high despite the upcoming holidays. And now, we have the most important central bank speaking out:

1. Japan Lower House Elections: Sunday. Japanese Prime Minister Shinzo Abe’s ruling party is expected to win sweeping victory according to media projection. Abe’s Liberal Democratic Party (LDP) is expected to take 303-320 seats of the powerful chamber’s 475 seats, reaching “super majority” needed to override votes in the upper house. The elections were called after Abe decided to push back the next sales tax hike as the previous one threw the country into recession. With high expectations, a failure to win a convincing majority could send the yen soaring and USD/JPY plunging down.
2. UK inflation data: Tuesday, 9:30. UK inflation edged up to an annual rate of 1.3% in October, following 1.2% in the previous month. Analysts expected CPI to remain at 1.2%. Prices in the recreation and culture sectors increased while transport costs, as well as food and non-alcoholic beverages, fell. Despite this rise, the Bank of England warned the inflation rate could dip to as low as 1% in the coming months. However, the small rise in the rate of inflation is unlikely to alter the central bank’s decision to keep its key interest rate at 0.5% for the time being. Inflation is expected to reach 1.2% in November.
3. German ZEW Economic Sentiment: Tuesday, 10:00. German economic sentiment rebounded in November, rising 15.1 points from October to 11.5. Analysts expected a modest improvement of 4.5 points towards 0.9 points. The recent encouraging signs of growth in the Eurozone suggesting the economy is stabilizing, contributed to the rise in sentiment. Economic sentiment is expected to edged up to 19.8 in December.
4. UK Governor Mark Carney speaks: Tuesday, 10:30. Mark Carney, head of the Bank of England is scheduled to hold a press conference and talk about the Financial Stability Report in London. Despite elevated household confidence, as well as other economic indicators, including a recent positive trend in wage growth, the Eurozone struggling economy poses the major threat to the UK’s recovery.
5. US Building Permits: Tuesday, 10:30. The number of permits for single- and multi-family housing edged up 4.8% in October, reaching a 1.08 million-unit pace, the highest since June 2008. The sharp rise in October was preceded by another increase in the prior month indicate a recovery trend in the housing market. However, the recent acceleration in demand is expected to boost wages and contribute to economic growth. The number of permits for single- and multi-family housing is forecasted t reach 1.06 million.
6. UK employment data: Wednesday, 9:30. The number of unemployed in the UK fell by 20,400 in October, reaching 931,700, the lowest level since August 2008. The sharp drop continued a positive trend in the UK labor market with an 18,400 fall in September and a 33,400 decline in August. The ongoing improvement in the job market is an encouraging sign that wages will eventually pick-up and boost UK’s domestic economy. Claimant Count Change is expected to drop by 19,800 this time. It is also important to note wages: a rise of 1.3% is expected in average hourly earnings. The unemployment rate is predicted to tick down to 6% from 5.9% last time.
7. US inflation data: Wednesday, 13:30. U.S. consumer prices remained unchanged in October, following September’s rise of 0.1%. Analysts expected a 0.1% decline in October. On a yearly base, consumer price index also remained unchanged from September’s increase of 1.7%. Excluding food and energy costs core consumer prices gained 0.2% in line with market forecast. On an annual basis, core CPI rose 1.8%, and remains below the Federal Reserve’s target of 2.0%. CPI is expected to decline 0.1%, while core CPI is predicted to gain 0.1%.
8. Fed decision: Wednesday, 19:00, press conference at 19:30. In the last FOMC gathering in October, the Fed ended QE3 as expected, ending all doubts. Their bullish view of the labor market gave a boost to the dollar. The main focus of this meeting is the “considerable time” phrase related to the timing of the first rate hike. There is speculation that the Fed will alter the phrasing and call for patience on the rate hikes. Given the recent jobs report, which finally included a rise in wages, there is also a chance that the Fed totally removes this wording thus hinting of an earlier rate hike, perhaps even in March. In addition to the statement, the Fed releases its forecasts, including the famous “dot chart”. The last release showed rates rising to 1.375 on average by the end of 2015. Will this average be pushed back with lower inflation expectations? And last but not least, Fed Chair Janet Yellen meets the press and reporters will likely try to extract some more specific wording about the timing of rate hikes. There are quite a few wild cards here and volatility is certainly expected to be wild. All in all, an upbeat view on the US economy should keep the dollar bid, while dovish caution, something that the Fed does very often, would weigh on the greenback.
9. NZ GDP: Wednesday, 21:45. New Zealand’s economy expanded at the fastest pace in 10 years in the second quarter, as Gross domestic product edged up 3.9% on a yearly base and 0.7% from the first quarter. Both readings exceeded market forecast. Strong domestic demand is the major growth force in New Zealand’s economy, but surging exports to China have also contributed to this expansion. Gross Domestic Product is expected to gain 0.7% in the third quarter.
10. German Ifo Business Climate: Thursday, 9:00. German business sentiment rebounded in November, reaching 104.7 from 103.2 posted in the prior month. The reading was better than the 103 points forecasted by analysts, signaling the downturn trend in German economy has halted. The slowdown in economic activity was led by the euro-area partners’ sluggish demand and a sharp drop in exports to Russia. The third quarter growth rate reached just 0.1% after a 0.1% contraction in the first quarter. However recent economic data suggest an ongoing improvement in the German economy. German business sentiment is expected to improve further to 105.6.
11. US Unemployment Claims: Thursday, 13:30. The number of Americans filing initial claims for unemployment benefits dropped 3,000 last week, reaching 294,000, staying below the 300,000 level. Analysts expected claims to reach 299,000. However, despite the fall in weekly claims, the number of continuing claims increased from 2.372 million to 2.514 million. The 4-week moving average increased to 299,250, from 299,000 posted last week. The number of initial claims for unemployment benefits is expected to reach 297,000 this week.
12. US Philly Fed Manufacturing Index: Thursday, 15:00. The Philly Fed manufacturing survey jumped from 20.7 in October to 40.8 in November posting the highest reading since December 1993. The big rise suggests increased growth in manufacturing activity. New orders and shipments showed similar improvement this month. Employment was higher and the outlook indicator showed expected growth will continue over the next six months. Manufacturing activity in the Philadelphia area is predicted to rise to 26.3 this time.
13. Japan rate decision: Friday. The Bank of Japan’s November Statement revealed the bank is willing to step up its operations of quantitative and qualitative monetary easing and presented its assessment of the outlook of the Japanese economy. The Policy Board members stated the weaknesses in demand after the consumption tax hike implementation. Prime Minister Shinzo Abe announced he would postpone the 2 percentage point tax hike scheduled for next October and also called for a general election.

Fundamental Forecast for Dollar: Neutral

• The FOMC rate decision this week is the quarterly event that comes stocked with updated forecasts and a Yellen presser
• Year-end portfolio rebalancing may find FX traders over-extended on Dollar exposure

Attachment 11321

The Dow Jones Dollar Index dropped this past week for the first time since the mid-October, market-wide slump. At the same time, the S&P 500 suffered its worst tumble since mid-2012. This hefty decline in capital markets and subsequent swell in volatility measures has the look-and-feel of a broad risk aversion move. This correlation between what is traditionally considered a safe haven currency and the financial system’s most stubborn speculative beacon (US equities) has many calling the Greenback a ‘risk’ currency at the same time anxiety over systemic risk aversion sets in. With a vested interest in risk trends and a high-profile FOMC rate decision ahead, plan for a potentially volatile week for the Dollar.

While the Fed meeting will be top event risk for both the US currency and broader markets, it will be important to get the lay of the land heading into the release. In particular, the steady rise in implied volatility (expected price swings) alongside the uniform retreat in growth and yield-dependent assets has many market participants unnverved. Historically, there is a seasonal effect that sees the S&P 500 climb (averaging 1.9 percent) and volume drain to its lowest level of any month according to data going back to 1990. While it may not be difficult to deviate from the so-called ‘Santa Claus’ rally, it is difficult to overcome the liquidity exit. It would take heavy fundamental and price-based change to motivate traders to remain active.

If we fall short of the full-scale risk aversion pace, a correction from the Dollar and US equities would reflect a natural moderation of one-sided markets – not particularly surprising given the former’s five-month rally to multi-year highs and the latter’s incredible six-week surge (a record breaking 29 days above the 5-day moving average) to record highs. Left undisturbed, a further retreat for both would be highly likely. Yet, given the items on the docket ahead, it is unlikely to be a quiet moderation.

In terms of volume, there are plenty of speculative-worthy updates ahead. The focus, however, will be set on a single event: the FOMC rate decision. This is one of the ‘quarterly’ meetings where the regular decision on rates and unorthodox policies as well as the monetary policy statement will be accompanied by updated forecasts (growth, inflation, employment and – most important of all – intrest rates) and Fed Chairwoman Janet Yellen’s press conference. There will be two particular elements to this event which traders will be watching: a change to the interest rate consensus and what will be done with the ‘considerable time’ language.

The infamous ‘dot plot’ has fueled plenty of hawkish speculation – particularly with the last update in September. The consensus forecast for the benchmark lending rate was 1.38 percent through the end of 2015. To reach that level and still conform to the expected ‘mid-2015’ first hike, the Fed would have to practically raise rates through each of the policy meetings in the second half of the year. That seems aggressive given current inflation forecasts and the specter of cooler global growth trends seeping into the US. As such, a moderation of this aggressive clip is likely. But, how market-moving would it be? Fed Funds and Eurodollar futures are already significantly discounting the rate move (pricing in approximately 50 bps worth of hikes through year’s end).

The other key aspect of the meeting will be the ‘considerable time’ language that has been repeated in the accompanying statement for over two years. This phrase is considered a buffer zone whereby each time it is revisited, the market expects at least another six months without a hike. A few Fed officials – including Yellen – reinforced that particular time frame this past year. In the past few months, officials have weighed in on dropping it from the text. If we don’t see it, the market will set its countdown for six-months (June 18 meeting). Yet, here too, a ‘mid-2015’ hike has been a well-priced mantra. What matters more: the first move or the pace?

the source

Fundamental Forecast for Pound: Neutral

• British Pound technical forecast looks favorable
• US Dollar may have finally turned, GBP may stage a recovery

Attachment 11322

The British Pound finished the week modestly higher but continued to trade in a tight range versus the US Dollar. A busy week ahead threatens to force a decisive break in the GBPUSD and other pairs.

The simultaneous release of UK Jobless Claims and Earnings data with Bank of England Minutes will likely prove the highlight in the days ahead, and GBPUSD traders should likewise keep a close eye on a highly-anticipated US Federal Reserve interest rate decision that same day. Earlier-week UK Consumer Price Index inflation figures as well as late-week UK Retail Sales results could also elicit reactions from GBP pairs.

Whether or not the Sterling mounts a sustained recovery versus the US Dollar will likely depend on the direction of interest rate expectations for both the Bank of England and the US Federal Reserve. A sharp compression in the spread between UK and US government bond yields helps explain why the British Pound fell to fresh 14-month lows versus the Greenback through November. Yet a great deal of uncertainty surrounds both the Fed and BoE; any surprises out of the coming week’s economic data and central bank rhetoric could easily force a repricing of yields and the GBPUSD exchange rate.

The US Dollar in particular looks vulnerable on any disappointments from the Federal Reserve, and indeed the previously-unstoppable USD finally showed concrete signs of slowing through the past week of trade. And though the Sterling could itself see fairly significant volatility on UK event risk, we expect that the overall US Dollar trend will ultimately dictate whether the GBPUSD makes a sustained recovery.

the source

Fundamental Forecast for Japanese Yen: Neutral

• Price & Time: USD/JPY - What Next?
• Yen Rally May Find Fuel in Russian Crisis Fears, ECB TLTRO

Attachment 11323

The near-term outlook for USD/JPY remains mired by Japan’s December 14 snap election, but the ongoing deviation in the policy outlook should continue to produce a further advance in the exchange rate as a growing number of Fed officials show a greater willingness to normalize monetary policy in 2015.

Despite the risk for a material shift in fiscal policy, recent headlines suggests ‘Abenomics’ will continue to influence the Japanese Yen in the year ahead as the Liberal Democratic Party (LDP) is widely expected to retain majority in the lower-house of the National Diet. As a result, the Bank of Japan (BoJ) may continue to highlight a dovish outlook for monetary policy at the December 19 meeting, and Governor Haruhiko Kuroda may keep the door open to further expand the asset-purchase program as the technical recession undermines the central bank’s scope to achieve the 2% target for inflation.

In contrast, there’s growing speculation the Federal Open Market Committee (FOMC) will remove the ‘considerable time’ phrase and implement a more hawkish twist to the forward-guidance as lower energy costs boost disposable incomes for U.S. households. The improved outlook for personal consumption – one of the leading drivers of growth – may encourage the Fed to boost its economic and interest rate projections as the central bank anticipates a stronger recovery in 2015. With that said, the bullish sentiment surrounding the greenback may gather pace over the remainder of the year should the fresh developments coming out of the FOMC heighten interest rate expectations.

In turn, the fundamental outlook continues to cast a long-term bullish outlook for USD/JPY, and we will retain the approach to buy-dips in the exchange rate unless there’s a meaningful change in fiscal/monetary policy. Dollar-yen appears to be coiling for a move higher as it holds above the 117.00 handle, with the next key topside objective for USD/JPY comes in around 122.30-40, the 78.6% Fibonacci retracement from the 2002 decline.



the source

Fundamental Forecast for Australian Dollar: Neutral

• Australian Dollar Torn Between Conflicting Year-End Liquidation Forces
• FOMC Outcome, RBA Minutes May Break Deadlock and Sink the Aussie

Attachment 11324

The Australian Dollar finds itself torn between conflicting forces as year-end liquidation on trends dominating markets in 2014 gathers momentum. Swelling risk appetite – embodied by a relentless push upward by the S&P 500 – and a firming US Dollar have been defining themes in the past year. Profit-taking on these trades ahead of the transition to 2015 has produced a parallel downturn in the greenback and the benchmark stock index.

This dynamic carries conflicting implications for AUDUSD. On one hand, the prices are being offered support by a market-wide unwinding of long-USD exposure. On the other, the shedding of risk-on exposure is putting downward pressure on the sentiment-geared Aussie Dollar. Not surprisingly, this produced relative standstill, with prices locked in a narrow range and waiting for guidance even as notable reversals are recorded elsewhere in the anti-USD space.

A shift in the relative monetary policy outlook may break the deadlock in the week ahead. Shifting expectations over recent weeks have delivered a priced-in G10 forecast that sees the RBA as one of the most dovish central banks in 2015. Indeed, with OIS rates implying at least one interest rate cut in the coming 12 months, the Australian monetary authority leads on the conventional policy easing front. Only the BOJ and the ECB may edge out Glenn Stevens and company for the most-dovish crown, and then only via expansions of non-standard measures.

This stands in stark contrast with the policy trajectory at the Federal Reserve. Markets are betting on at least one rate hike in 2015 and have been flirting with the possibility that US officials will be able to squeeze in two of them before year-end. US economic news-flow appears to be gathering steam relative to consensus forecasts once again. Data from Citigroup suggests that, on the whole, realized outcomes are now outstripping expected ones by the widest margin since mid-September. This has already encouraged markets to bet on the sooner arrival of the first post-QE rate hike. Next week’s FOMC policy announcement – this time complete with an updated set of economic projections and press conference from Chair Janet Yellen – may see the timeline shorten further.

On the domestic front, minutes from December’s RBA meeting will be in the spotlight. The markets were not meaningfully swayed against betting on a 2015 rate cut by the neutral statement that emerged out of that sit-down. This suggests that anything but a convincing hawkish rhetorical shift – an outcome that seems overwhelmingly unlikely even on a relative basis – will keep bets on a 25-75 basis point pro-USD move in the policy spread comfortably in place. Taken together with guidance from the Fed, that may tip the scales to produce a bearish break out of consolidation for the Aussie.



the source

Fundamental Forecast for Gold: Neutral

• Gold ‘Acting’ Bullish Near Term; 1255-1263 Could Influence
• Gold Breaks 5-Month Down Trend, SPX 500 Double Top Firming

Attachment 11325

Gold prices are markedly higher this week with the precious metal rallying 2.5% to trade at $1222 ahead of the New York close on Friday. The advance comes amid a turbulent week for broader risk assets with global equity markets selling off sharply on global growth concerns. Weakness in the US Dollar and falling crude prices have further impacted risk appetite with gold well supported as investors sought alternative stores of wealth. Despite the gains however, prices continue to hold below a key resistance threshold with the near-term risk weighted to the downside heading into next week.

It was a rough week for equities with the SPX off more than 2.70% on the week as growing political uncertainty in Greece and concerns over the weakening outlook for global growth sparked a wave of profit taking. The accompanied sell off in crude prices, which hit lows not seen since 2009 on Friday, have continued to weigh on broader market sentiment, with gold catching a bid early in the week.

Looking ahead to next week, US economic data comes back into focus with the November Consumer Price Index and the highly anticipated FOMC policy decision on Wednesday. As officials anticipate weaker energy prices to boost disposable incomes for U.S. households, the recent pickup in job/wage growth may embolden the committee to take a more hawkish stance on monetary policy with speculation circulating that the central bank may look to remove the “considerable time period” language as it pertains to interest rates. Should the subsequent presser and updated growth projection show a more upbeat assessment, gold could come under pressure as investors begin to bring forward interest rate expectations. That said, the trade remains vulnerable near-term just below key resistance.

From a technical standpoint, gold has now pared 50% of the decline off the July high with the move into the $1237 target we noted last week . This level converges with a median line dating back to August 2013 and near-term the risk remains weighted to the downside while below this threshold. A breach above targets subsequent targets at $1248 and a key resistance range at $1262/68. Interim support rests at $1206 and $1196 with only a move sub-$1179/80 shifting the broader focus back to the short-side. Bottom line: longs at risk near-term sub $1237 with a pullback likely to offer more favorable long-entries lower down. A breach of the highs keeps the topside bias in play with such a scenario eyeing targets into the 200-day moving average.



the source

The gold markets rose during the course of the week as you can see, testing the $1250 level. That being the case, we think that the market could run into a significant amount resistance here, but we do not have the right setup to start selling yet. Ultimately, we think that this market will test the $1150 level given enough time, so at this point time we are not necessarily excited about buying gold. However, we recognize that if we get at least a daily close above the $1250 level we could start buying.

http://youtu.be/VDUcnPgwmnM

the source

The USD/JPY pair fell during most of the week, slicing down to the 118 level. With that being the case, we ended up finding support in that general vicinity, and we believe that the markets will continue to find buyers at lower levels. We think that the 115 level is the “floor” at the moment, and we are looking for supportive candles in order to start buying again. We have absolutely no interest in selling this pair, and believe that just simply being patient is the way to find buying opportunities again and again.

http://youtu.be/NRkBLj6Q_3k

the source

The USD/CAD pair initially fell during the course of the week, but then shot through the resistance at the 1.15 level in order to continue to show serious strength. With that, the market looks as if it’s ready to continue going on its next leg up, and that pullbacks should offer value in the US dollar. The 1.13 level should be massively supportive, so we do not believe that the market will fall below there. Ultimately, we believe that this market will then head to the 1.20 level given enough time.

http://youtu.be/an58t45FebI

the source

The NZD/USD pair broke higher during the course of the week, as we found a bit of support below. However, there is still a significant amount of resistance above, at the 0.80 handle, and with that we feel that the sellers will step in sooner or later. We have no interest in buying this pair, as the Royal Bank of New Zealand continues to work against the value the Kiwi dollar going forward, and as a result we feel the market will ultimately go to the 0.75 handle.

http://youtu.be/zMKQtkIxAjQ

the source

The GBP/USD pair broke higher during the course of the week, testing the 1.57 region. The fact that we done so far into the previous two shooting stars tells us that we could in fact see continuation as we have certainly seen quite a bit of pressure put on the resistance. However, we believe that the market should offer selling opportunities at higher levels. We are especially keen on selling at the 1.60 handle, as it should continue to be important based upon previous support, and now what we believe to be future resistance.

http://youtu.be/yL_hkrcoWVc

the source

The EUR/USD pair broke higher during the course of the week, but as you can see struggled at the 1.25 handle. This is an area that has been resistive in the past, so it makes sense that we would run into resistance again. We believe that the downtrend is most certainly still in effect, but we do not have a resistant candle to start selling yet. Because of this, we are on the sidelines as far as longer-term trades are concerned, but we certainly wouldn’t be interested in buying this market.

After all, we are heading towards the end of the year, and the liquidity will all but disappear. With that, we think that short-term traders only can be bothered to be in this marketplace, and that sudden erratic corrections can occur at any time. I have a yellow box drawn on the chart which for me signifies when the trend changes. If we get above there, extensively the 1.30 handle, we could see the market go much higher. Probably to the 1.135 level would be the next target at that point time, but it takes a lot for that to happen in our opinion.

More than likely, the market will probably do very little over the next couple of weeks, at least as far as anything along the lines of a substantial move. Ultimately, the market could bounce a bit from here and offer a selling opportunity but we would need to see the resistive candle form in order to do so. Perhaps we may get a little bit of a late December surprise, but ultimately we feel that this market is going to continue going lower once the liquidity returns the marketplace.

Looking at the longer-term charts, we believe that the 1.2050 level is the target given enough time, and as a result we are not interested in buying under any circumstances, even though we do recognize that a bit of a bounce could happen. We believe that 2015 will be very hard on the Euro as well.

http://youtu.be/fz_9eJPKo28

the source

The dollar gained ground against the euro on Friday following the release of strong U.S. economic data and surged to more than five year highs against the commodity-exposed Canadian dollar as oil prices continued to drop.

EUR/USD was up 0.44% to 1.2461 in late trade. The dollar was boosted after data showing U.S. consumer sentiment rose to an almost eight-year high in December.

The preliminary reading of the University of Michigan's consumer sentiment index rose to 93.8, the highest level since January 2007 and ahead of forecasts of 89.7. Consumer sentiment was boosted by the improving outlook for employment and wage growth and lower gasoline prices.

The data underlined expectations for a hike in U.S. interest rates by the Federal Reserve next year.

The U.S. dollar index, which measures the greenback against a basket of six major currencies, recovered from session lows of 88.12 following the report to settle at 88.34, still off 0.26% for the day. On Monday the index rose to a five year high of 89.53.

The dollar also pushed higher against the yen, with USD/JPY at 118.77 in late trade, off lows of 118.05.

Elsewhere, the Canadian dollar fell to five-and-a-half year lows, with USD/CAD hitting highs of 1.1590, before easing back to 1.1578 in late trade.

Oil prices dropped to their lowest level in five years on Friday after the International Energy Agency cut its forecast for global oil demand for the fifth time in six months.

Canada is a major oil exporter and the currency's sensitivity to crude prices has intensified as prices continued to tumble.

The Russian ruble fell to record lows against the dollar on Friday and the Norwegian krone fell to 11-year lows after rate hikes by both countries central banks on Thursday failed to offset the selling pressure brought to bear by the continued decline in oil prices.

USD/RUB jumped 3.23% to 58.20 late Friday while USD/NOK was up 0.98% to settle at 7.36 after hitting highs of 7.39 earlier, the most since September 2003.

In the week ahead, investors will be awaiting the outcome of Wednesday’s Federal Reserve policy meeting for further clarification on when interest rates might start to rise. Japan’s central bank is also to hold a policy setting meeting next week. The euro zone is to produce what will be closely watched reports on private sector activity.

Monday, December 15

• Japan is to publish reports on the Tankan manufacturing and non-manufacturing index.
• Switzerland is to publish data on producer price inflation.
• In the euro zone, Germany’s Bundesbank is to publish its monthly report.
• The U.K. is to release private sector data on industrial order expectations.
• Later Monday, the U.S. is to release reports on manufacturing activity in the New York region and industrial production.

Tuesday, December 16

• The Reserve Bank of Australia is to publish the minutes of its latest policy meeting, which contain valuable insights into economic conditions from the bank’s perspective.
• China is to publish the preliminary reading of its HSBC manufacturing index.
• In the U.K., the Bank of England is to publish its financial stability report. BoE Governor Mark Carney is to hold a press conference about the report.
• The U.K. is also to release data on consumer inflation, which accounts for the majority of overall inflation.
• The euro zone is to publish preliminary data on private sector activity, while Germany and France are to also to publish data on private sector growth.
• The ZEW Institute is to release its closely watched report on German economic sentiment, a leading indicator of economic health.
• Canada is to produce data on manufacturing sales and foreign securities purchases.
• The U.S. is to publish reports on building permits and housing starts.
• Later in the day, New Zealand is to release data on its current account.

Wednesday, December 17

• Japan is to publish a report on its trade balance.
• The U.K. is to release data on the change in the number of people employed, the unemployment rate and average earnings. In addition, the BoE is to publish the minutes of its latest policy meeting.
• The euro zone is to produce revised data on consumer price inflation.
• Canada is to publish a report on wholesale sales.
• The U.S. is to release data on consumer inflation and the current account. Later Wednesday, the Federal Reserve is to publish its rate statement and economic projections for the next two years. Fed Chair Janet Yellen is to hold what will be a closely watched press conference.
• New Zealand is to release data on gross domestic product, the broadest indicator of economic activity and the leading measure of the economy’s health.

Thursday, December 18

• Switzerland is to report on its trade balance.
• The Ifo Institute is to release a report on German business climate.
• The U.K. is to release data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity.
• The U.S. is to release data on initial jobless claims and manufacturing activity in the Philadelphia region.

Friday, December 19

• New Zealand is to release private sector data on business confidence.
• The Bank of Japan is to announce its benchmark interest rate and publish its rate statement, which outlines economic conditions and the factors affecting the monetary policy decision. The bank will hold a press conference following the announcement.
• Germany is to release a report by Gfk on consumer climate.
• The U.K. is to release data on public sector net borrowing, as well as a private sector report on retail sales.
• Canada is to round up the week with reports on retail sales and consumer inflation.

the source

The U.S. dollar edged higher against the yen on Friday after data showed that U.S. consumer sentiment rose to an almost eight-year high this month, underlining the view that the economic recovery is continuing to gain momentum.

USD/JPY edged up 0.08% to 118.77 in late trade, off lows of 118.05. The pair ended the week down 2.33%.

The preliminary reading of the University of Michigan's consumer sentiment index rose to 93.8, the highest level since January 2007 and ahead of forecasts of 89.7.

Consumer sentiment was boosted by the improving outlook for employment and wage growth and lower gasoline prices.

The data underpinned expectations for a hike in U.S. interest rates by the Federal Reserve next year.

The U.S. dollar index, which measures the greenback against a basket of six major currencies, recovered from session lows of 88.12 following the report to settle at 88.34, still off 0.26% for the day.

The dollar fell sharply against the yen earlier in the week, reversing a rally to Monday’s seven year highs of 121.83, as concerns over political uncertainty in Greece hit market sentiment, boosting demand for the traditional safe haven yen.

Investors were spooked by a surprise decision by the Greek government to bring forward a parliamentary vote for president to next week from February.

The move raised the prospect of snap elections if Prime Minister Antonis Samaras’ candidate is not approved by parliament, which could see the anti-bailout Syriza party take power.

Economic reports pointing to a slowdown in China and the ongoing decline in oil prices also fuelled risk aversion.

In the week ahead, investors will be awaiting the outcome of Wednesday’s Federal Reserve policy meeting for further clarification on when interest rates might start to rise.

Japan’s central bank is also to hold a policy setting meeting next week.

Monday, December 15

• Japan is to publish reports on the Tankan manufacturing and non-manufacturing index.
• Later Monday, the U.S. is to release reports on manufacturing activity in the New York region and industrial production.

Tuesday, December 16

• The U.S. is to publish reports on building permits and housing starts.

Wednesday, December 17

• Japan is to publish a report on its trade balance.
• The U.S. is to release data on consumer inflation and the current account. Later Wednesday, the Federal Reserve is to publish its rate statement and economic projections for the next two years. Fed Chair Janet Yellen is to hold what will be a closely watched press conference.

Thursday, December 18

• The U.S. is to release data on initial jobless claims and manufacturing activity in the Philadelphia region.

Friday, December 19

• The Bank of Japan is to announce its benchmark interest rate and publish its rate statement, which outlines economic conditions and the factors affecting the monetary policy decision. The bank will hold a press conference following the announcement.

the source

The U.S. dollar rose to more than five-year highs against the commodity exposed Canadian dollar on Friday amid the ongoing decline in oil prices and after a strong report on U.S. consumer sentiment.

USD/CAD hit highs of 1.1590, the most since July 2009, before easing back to 1.1578 in late trade.

Oil prices hit lows not seen since 2009 on Friday, with Brent below $62 per barrel and US crude down to $57 a barrel after the International Energy Agency cut its forecast for global oil demand for the fifth time in six months.

Canada is a major oil exporter and the currency's sensitivity to crude prices has intensified as prices have tumbled.

The greenback received an additional boost after data showing U.S. consumer sentiment rose to an almost eight-year high in December.

The preliminary reading of the University of Michigan's consumer sentiment index rose to 93.8, the highest level since January 2007 and ahead of forecasts of 89.7. Consumer sentiment was boosted by the improving outlook for employment and wage growth and lower gasoline prices.

The data underlined expectations for a hike in U.S. interest rates by the Federal Reserve next year.

The U.S. dollar index, which measures the greenback against a basket of six major currencies, recovered from session lows of 88.12 following the report to settle at 88.34, still off 0.26% for the day. On Monday the index rose to a five year high of 89.53.

The loonie, as the Canadian dollar is also known, fell to two month lows against the euro on Friday, with EUR/CAD up 0.95% to 1.4428 in late trade.

In the week ahead, investors will be awaiting the outcome of Wednesday’s Federal Reserve policy meeting for further clarification on when interest rates might start to rise. Friday's reports on Canadian retail sales and inflation will also be closely watched.

Monday, December 15

• The U.S. is to release reports on manufacturing activity in the New York region and industrial production.

Tuesday, December 16

• Canada is to produce data on manufacturing sales and foreign securities purchases.
• The U.S. is to publish reports on building permits and housing starts.

Wednesday, December 17

• Canada is to publish a report on wholesale sales.
• The U.S. is to release data on consumer inflation and the current account. Later Wednesday, the Federal Reserve is to publish its rate statement and economic projections for the next two years. Fed Chair Janet Yellen is to hold what will be a closely watched press conference.

Thursday, December 18

• The U.S. is to release data on initial jobless claims and manufacturing activity in the Philadelphia region.

Friday, December 19

• Canada is to round up the week with reports on retail sales and consumer inflation.

the source

The Australian dollar ended close to the lowest level in more than four years against its U.S. counterpart on Friday, amid indications a strengthening U.S. economic recovery will force the Federal Reserve to start raising interest rates sooner and faster than previously thought.

AUD/USD fell to 0.8213 on Thursday, the pair's lowest since June 2010, before subsequently consolidating at 0.8246 by close of trade on Friday, down 0.28% for the day and 0.78% lower for the week.

The pair is likely to find support at 0.8213, the low from December 11, and resistance at 0.8374, the high from December 11.

The preliminary reading of the University of Michigan's consumer sentiment index released Friday rose to 93.8, the highest level since January 2007 and ahead of forecasts of 89.7.

Consumer sentiment was boosted by the improving outlook for employment and wage growth and lower gasoline prices.

The data underpinned expectations for a hike in U.S. interest rates by the Federal Reserve next year.

Economic reports pointing to a slowdown in China also fuelled risk aversion.

Official data released Friday showed that industrial production in China rose 7.2% in November, missing expectations for an increase of 7.5% and slowing from a 7.7% gain in October.

The disappointing data added to fears that China will miss its annual growth target of 7.5% and boosted speculation that the government will need to roll out fresh stimulus measures to avert a sharper slowdown.

The Asian nation is Australia's largest trade partner.

Meanwhile, in Australia, data published Thursday showed that the number of employed people increased by 42,700 last month, beating expectations for a 12,400 rise.

The report also showed that Australia's unemployment rate ticked up to 6.3% in November from 6.2% the previous month, in line with expectations.

In the week ahead, investors will be awaiting the outcome of Wednesday’s Federal Reserve policy meeting amid speculation that policymakers could drop an assurance that interest rates will stay low for a "considerable time".

Monday, December 15

• The U.S. is to release reports on manufacturing activity in the New York region and industrial production.

Tuesday, December 16

• The Reserve Bank of Australia is to publish the minutes of its latest policy meeting, which contain valuable insights into economic conditions from the bank’s perspective.
• China is to publish the preliminary reading of its HSBC manufacturing index.
• The U.S. is to publish reports on building permits and housing starts.

Wednesday, December 17

• The U.S. is to release data on consumer inflation and the current account. Later Wednesday, the Federal Reserve is to publish its rate statement and economic projections for the next two years. Fed Chair Janet Yellen is to hold what will be a closely watched press conference.

Thursday, December 18

• The U.S. is to release data on initial jobless claims and manufacturing activity in the Philadelphia region.

the source

The New Zealand dollar edged lower against its U.S. counterpart on Friday, as upbeat U.S. consumer sentiment data added to expectations that the Federal Reserve could raise interests sooner and faster than previously expected.

NZD/USD hit 0.7607 on Tuesday, the pair's lowest since June 2012, before subsequently consolidating at 0.7778 by close of trade on Friday, down 0.49% for the day but 0.8% higher for the week.

The pair is likely to find support at 0.7660, the low from December 10, and resistance at 0.7870, the high from December 11.

The preliminary reading of the University of Michigan's consumer sentiment index released Friday rose to 93.8, the highest level since January 2007 and ahead of forecasts of 89.7.

Consumer sentiment was boosted by the improving outlook for employment and wage growth and lower gasoline prices.

The data underpinned expectations for a hike in U.S. interest rates by the Federal Reserve next year.

Economic reports pointing to a slowdown in China also fuelled risk aversion.

Official data released Friday showed that industrial production in China rose 7.2% in November, missing expectations for an increase of 7.5% and slowing from a 7.7% gain in October.

The disappointing data added to fears that China will miss its annual growth target of 7.5% and boosted speculation that the government will need to roll out fresh stimulus measures to avert a sharper slowdown.

The Asian nation is New Zealand's second-largest trade partner.

Meanwhile, the Reserve Bank of New Zealand held its benchmark interest rate at 3.50% on Thursday and added that "some further increase in the official cash rate is expected to be required at a later stage."

Commenting on the decision, RBNZ Governor Graeme Wheeler said that "gradual increases in interest rates will still be needed as the economy expands at around 3% a year and the country's jobless rate falls."

In the week ahead, investors will be awaiting the outcome of Wednesday’s Federal Reserve policy meeting amid speculation that policymakers could drop an assurance that interest rates will stay low for a "considerable time".

A report on third quarter economic growth out of New Zealand will also be closely watched.

Monday, December 15

• The U.S. is to release reports on manufacturing activity in the New York region and industrial production.

Tuesday, December 16

• China is to publish the preliminary reading of its HSBC manufacturing index.
• The U.S. is to publish reports on building permits and housing starts.
• Later in the day, New Zealand is to release data on its current account.

Wednesday, December 17

• The U.S. is to release data on consumer inflation and the current account.
• Later Wednesday, the Federal Reserve is to publish its rate statement and economic projections for the next two years. Fed Chair Janet Yellen is to hold what will be a closely watched press conference.
• New Zealand is to release data on gross domestic product, the broadest indicator of economic activity and the leading measure of the economy’s health.

Thursday, December 18

• The U.S. is to release data on initial jobless claims and manufacturing activity in the Philadelphia region.

Friday, December 19

• New Zealand is to release private sector data on business confidence

.

the source

The euro gained ground against the dollar on Friday, but gains were held in check following a strong report on U.S. consumer sentiment, while falling oil prices and fears over political uncertainty in Greece continued to fuel risk aversion.

EUR/USD was up 0.44% to 1.2461 in late trade, extending its pullback from the two-year trough of 1.2246 struck on Monday.

The dollar found support after data showing U.S. consumer sentiment rose to an almost eight-year high in December.

The preliminary reading of the University of Michigan's consumer sentiment index rose to 93.8, the highest level since January 2007 and ahead of forecasts of 89.7.

Consumer sentiment was boosted by the improving outlook for employment and wage growth and lower gasoline prices. The data underlined expectations for a hike in U.S. interest rates by the Federal Reserve next year.

The U.S. dollar index, which measures the greenback against a basket of six major currencies, recovered from session lows of 88.12 following the report to settle at 88.34, still off 0.26% for the day. On Monday the index rose to a five year high of 89.53.

Investors remained wary in the wake of a surprise decision by the Greek government to bring forward a parliamentary vote for president to next week from February.
The move raised the prospect of snap elections if Prime Minister Antonis Samaras’ candidate is not approved by parliament, which could see the anti-bailout Syriza party take power.

Economic reports pointing to a slowdown in China and the ongoing decline in oil prices also fuelled risk aversion.

Oil prices hit lows not seen since 2009 on Friday, with Brent below $62 per barrel and US crude down to $57 a barrel after the International Energy Agency cut its forecast for global oil demand for the fifth time in six months.

In the week ahead, investors will be awaiting the outcome of Wednesday’s Federal Reserve policy meeting for further clarification on when interest rates might start to rise. The euro zone is to produce what will be closely watched reports on private sector activity.

Monday, December 15

• In the euro zone, Germany’s Bundesbank is to publish its monthly report.
• Later Monday, the U.S. is to release reports on manufacturing activity in the New York region and industrial production.

Tuesday, December 16

• The euro zone is to publish preliminary data on private sector activity, while Germany and France are to also to publish data on private sector growth.
• The ZEW Institute is to release its closely watched report on German economic sentiment, a leading indicator of economic health.
• The U.S. is to publish reports on building permits and housing starts.

Wednesday, December 17

• The euro zone is to produce revised data on consumer price inflation.
• The U.S. is to release data on consumer inflation and the current account. Later Wednesday, the Federal Reserve is to publish its rate statement and economic projections for the next two years. Fed Chair Janet Yellen is to hold what will be a closely watched press conference.

Thursday, December 18

• The Ifo Institute is to release a report on German business climate.
• The U.S. is to release data on initial jobless claims and manufacturing activity in the Philadelphia region.

Friday, December 19

• Germany is to release a report by Gfk on consumer climate.

the source