Weekly Outlook: 2014, October 12 - 19

NZD/USD weekly outlook: October 13 - 17

The New Zealand dollar edged lower against its U.S. counterpart on Friday, as concerns over the global economic outlook sapped investor demand for growth-linked assets.

NZD/USD hit 0.7973 on Thursday, the pair’s highest level since September 25, before subsequently consolidating at 0.7814 by close of trade on Friday, down 0.64% for the day but still 0.65% higher for the week.

The pair is likely to find support at 0.7782, the low from October 8, and resistance at 0.7973, the high from October 9.

Market sentiment was hit by fears that Germany, the euro zone’s largest economy is being dragged into a recession after recent data indicated unexpected weakness in manufacturing and exports.

Steep declines in commodity prices also fuelled fears that the global economy is slowing. Brent crude prices fell to their lowest level in almost four years on Friday.

Earlier in the week, the International Monetary Fund cut its forecasts for global growth in 2014 and 2015 and warned that the recovery remains weak and uneven.

The dollar weakened after the minutes of the Federal Reserve’s September meeting released Wednesday showed that some officials were concerned over a slowdown in global growth and the impact of the stronger dollar on the U.S. inflation outlook.

"Some participants expressed concern that the persistent shortfall of economic growth and inflation in the euro area could lead to a further appreciation of the dollar and have adverse effects on the U.S. external sector," the minutes said.

The minutes prompted investors to trim back expectations for an earlier-than-expected hike in U.S. interest rates.

On Friday, Fed Vice Chairman Stanley Fischer said weaker-than-expected global growth could prompt it to slow the pace of eventual interest rate hikes.

The US Dollar Index, which tracks the performance of the greenback against a basket of six major currencies, ended the week down 1% at 85.92. The move ended a 12-week rally that saw the index gain more than 8% since early July.

Data from the Commodities Futures Trading Commission released Friday showed that speculators turned bearish on the New Zealand dollar in the week ending October 7.

Net shorts totaled 100 contracts, compared to net longs of 64 in the preceding week.

In the week ahead, investors will be awaiting U.S. data on retail sales and industrial production for fresh indications on the strength of the economic recovery.

Monday, October 13

• Markets in the U.S. will be closed for Columbus Day.

Wednesday, October 15

• The U.S. is to release data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity. The country is also to report on producer prices and manufacturing activity in the New York region.

Thursday, October 16

• New Zealand is to publish private sector data on manufacturing activity.
• The U.S. is to release the weekly report on initial jobless claims as well as data on industrial production and manufacturing activity in the Philadelphia region.

Friday, October 17

• The U.S. is to round up the week with reports on building permits and housing starts, as well as a preliminary report on consumer sentiment.

EUR/USD weekly outlook: October 13 - 17

The euro declined against the dollar on Friday amid concerns the European economy is floundering and may require fresh stimulus measures from the European Central Bank.

EUR/USD hit 1.2790 on Thursday, the pair’s highest level since September 24, before subsequently consolidating at 1.2629 by close of trade on Friday, down 0.48% for the day but still 0.91% higher for the week.

The pair is likely to find support at 1.2582, the low from October 6, and resistance at 1.2790, the high from October 9.

Market sentiment was hit by fears that Germany, the euro zone’s largest economy is being dragged into a recession after recent data indicated unexpected weakness in manufacturing and exports.

Data released on Thursday showed that German exports fell 5.8% in August, and this followed weak industrial output figures on Tuesday.

Earlier in the week, the International Monetary Fund cut its forecasts for global growth in 2014 and 2015 and warned that global growth may never reach its pre-crisis levels ever again.

The fund revised down its growth forecasts for the euro area’s three largest economies Germany, France and Italy.

Steep declines in commodity-price declines also fuelled fears that the global economy is slowing. Brent crude oil prices fell to their lowest level for nearly four years on Friday.

The dollar weakened after the minutes of the Federal Reserve’s September meeting released Wednesday showed that some officials were concerned over a slowdown in global growth and the impact of the stronger dollar on the U.S. inflation outlook.

"Some participants expressed concern that the persistent shortfall of economic growth and inflation in the euro area could lead to a further appreciation of the dollar and have adverse effects on the U.S. external sector," the minutes said.

The minutes prompted investors to trim back expectations for an earlier-than-expected hike in U.S. interest rates.

On Friday, Fed Vice Chairman Stanley Fischer said weaker-than-expected global growth could prompt it to slow the pace of eventual interest rate hikes.

The US Dollar Index, which tracks the performance of the greenback against a basket of six major currencies, ended the week down 1% at 85.92. The move ended a 12-week rally that saw the index gain more than 8% since early July.

In the week ahead, investors will be awaiting U.S. data on retail sales and industrial production for fresh indications on the strength of the economic recovery. Tuesday’s ZEW report on German economic sentiment will also be closely watched.

Monday, October 13

• Markets in the U.S. will be closed for Columbus Day.

Tuesday, October 14

• The ZEW Institute is to release its closely watched report on German economic sentiment, a leading indicator of economic health.
• The euro zone is to publish data on industrial production.

Wednesday, October 15

• The U.S. is to release data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity. The country is also to report on producer prices and manufacturing activity in the New York region.

Thursday, October 16

• The euro zone is to publish revised data on consumer prices for September.
• The U.S. is to release the weekly report on initial jobless claims as well as data on industrial production and manufacturing activity in the Philadelphia region.

Friday, October 17

• The U.S. is to round up the week with reports on building permits and housing starts, as well as a preliminary report on consumer sentiment.

The CPI measures change in the prices of customer products across more than 200 different classifications. This report, when compared to a country's fares, can be utilized to check whether a nation is making or losing money on its items and administrations. Be careful, in any case, to screen the fares - it is a well-known concentration with numerous traders on the grounds that the prices of fares frequently change relative to a currency's strength or shortcoming.