Forex - Weekly outlook: September 29 - October 3

The dollar rose to fresh six year highs against the yen on Friday and hit 14-month peaks against the euro after data showed that the U.S. economy grew at its fastest pace in two-and-a-half years in in the second quarter.

USD/JPY hit highs of 109.52, the most since August 2008 and was last up 0.49% to 109.26.

EUR/USD was at lows of 1.2682 late Friday, the weakest since November 2012.

The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies ended Friday’s session up 0.51% to a four year high of 85.77, capping its eleventh consecutive weekly gain.

The dollar was boosted after the Commerce Department reported that U.S. gross domestic product was revised up to 4.6% in the three months to June from a previous estimate of 4.2%. It was the fastest rate of expansion since the fourth quarter of 2011.

The upbeat data added to the view that the strengthening economic recovery may prompt the Federal Reserve to raise interest rates sooner than markets are expecting.

In contrast, the Bank of Japan and the European Central Bank look likely to stick to a loose monetary policy stance amid concerns over faltering economic growth.

The pound fell to more than one week lows against the stronger dollar, with GBP/USD down 0.44% to 1.6243 late Friday. Elsewhere, sterling was close to two year highs against the single currency, with EUR/GBP at 0.7806 in late trade.

The commodity linked dollars fell to multi-month lows against the greenback. AUD/USD was down 0.29% to an almost six month trough of 0.8761 late Friday, while NZD/USD hit one year lows of 0.7860. USD/CAD was up 0.44% to 1.1156, the highest level since March.

Also Friday, the Russian rouble fell to a fresh record lower against the greenback, with USD/RUB up 1.69% to 39.14 in late trade. The rouble was pressured lower by falling oil prices. Crude oil is one of Russia’s largest exports.

In the week ahead, investors will be looking ahead to euro zone inflation data and the outcome of Thursday’s ECB meeting, while Friday’s U.S. nonfarm payrolls report will also be in focus after August’s report fell short of expectations. Wednesday’s Japanese manufacturing data will also be closely watched.

Monday, September 29
  • In the euro zone, Germany and Spain are to release preliminary data on consumer price inflation, which accounts for the majority of overall inflation.
  • The U.K. is to release a report on net lending.
  • The U.S. is to produce data on personal income and expenditure, as well as a private sector report on pending home sales.

Tuesday, September 30
  • New Zealand is to release data on building permits, in addition to a private sector report on business confidence.
  • Japan is to publish reports on household spending, retail sales and average earnings, as well as preliminary data on industrial production.
  • Meanwhile, China is to publish the final reading of the HSBC manufacturing index.
  • The euro zone is to release preliminary data on consumer inflation and unemployment, while Germany is to publish data on retail sales and unemployment.
  • The U.K. is to report on preliminary business investment and the current account and IS TO release final data on GDP growth. The country is also to produce private sector data on house price inflation.
  • Switzerland is to publish its KOF economic barometer.
  • Later Tuesday, Canada is to release its monthly GDP report along with data on raw material inflation.
  • The U.S. is to publish data on business activity in the Chicago region and a report on consumer confidence.

Wednesday, October 1
  • Japan is to publish the results of its Tankan manufacturing and services indices.
  • Markets in China are to remain closed for a holiday, but the country is to release official data on manufacturing activity.
  • Australia is to publish data on retail sales.
  • The U.K. is to publish data on manufacturing activity.
  • The U.S. is to release the ADP report on private sector job creation, which leads the government’s nonfarm payrolls report by two days. Late in the day, the Institute of Supply Management is to release a report on manufacturing activity.

Thursday, October 2
  • Markets in Hong Kong will be closed for a national holiday.
  • Australia is to release data on building approvals and the trade balance.
  • In the euro zone, Spain is to release a report on the change in the number of people unemployed.
  • The U.K. is to publish data on construction activity.
  • The ECB is to announce its benchmark interest rate. The announcement is to be followed by a press conference with President Mario Draghi.
  • The U.S. is to publish the weekly report on initial jobless claims, as well as data on factory orders.

Friday, October 3
  • Markets in China will be closed for a national holiday.
  • The euro zone is to release data on retail sales, while markets in German are to be closed for a holiday.
  • The U.K. is to publish data on service sector activity.
  • Both Canada and the U.S. are to report on the trade balance.
  • The U.S. is to round up the week with what will be closely watched government data on nonfarm payrolls and the unemployment rate, while the Institute of Supply Management is to release data on manufacturing activity.