Forex - Weekly outlook: 12.04 - 12.08
The dollar ended lower on Friday as investors weighed concerns over heightened political uncertainty in the U.S. against growing optimism that U.S. Senate Republicans would be able to pass a tax overhaul bill.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.17% to 92.81 in late trade after going as low as 92.55 earlier.
The dollar came under pressure following reports that former national security adviser Michael Flynn is prepared to cooperate the special counsel probe into alleged links between the Trump campaign and Russia during last year’s election.
Flynn pleaded guilty Friday morning to lying to the Federal Bureau of Investigation about his communications with the Russian ambassador to the U.S. in December 2016.
The index later pared some of its losses after Senate Majority Leader Mitch McConnell said Republicans had the votes to pass a sweeping tax-overhaul bill after last-minute negotiations to address concerns about the bill’s impact on the federal deficit, healthcare and property taxes.
The Trump administration has said its tax cuts will generate growth and spark inflation, which investors hope will prompt a faster pace of monetary tightening by the Federal Reserve.
The dollar was lower against the yen, late Friday, with USD/JPY down 0.3% to 112.18.
The dollar was also lower against the traditional safe haven Swiss franc, with USD/CHF falling 0.73% to 0.9762.
The yen and the Swiss franc are often sought by investors in times of market uncertainty.
The euro was little changed against the dollar late Friday, with EUR/USD at 1.1896.
Sterling retreated from two-month highs, with GBP/USD down 0.42% to 1.3471 as concerns over progress in Brexit negotiations offset stronger-than-forecast UK manufacturing data.
Elsewhere, the Canadian dollar jumped to one-week highs, with USD/CAD falling 1.64% to 1.2683 in late trade after solid Canadian jobs data boosted expectations for further rate hikes by the country’s central bank in 2018.
In the week ahead, investors will be continuing to focus on U.S. political developments. Economic data will also be in the spotlight, with market watchers looking ahead to Friday’s U.S. nonfarm payrolls report for November.
Interest rate reviews in Australia and Canada will also be closely watched.
Monday, December 4
Australia is to report on company profits.
The UK is to publish data on construction sector activity.
The eurogroup of euro zone finance ministers are to hold meetings in Brussels.
The U.S. is to release data on factory orders.
Tuesday, December 5
Australia is to release data on retail sales and the current account.
The Reserve Bank of Australia is to announce its benchmark interest rate and publish a rate statement which outlines economic conditions and the factors affecting the monetary policy decision.
China is to publish its Caixin services index.
The UK is to publish data on service sector activity.
Canada and the U.S. are to publish trade data.
Later Tuesday, the Institute for Supply Management is to publish its manufacturing index.
Wednesday, December 6
Australia is to release figures on third quarter growth.
The U.S. is to release the ADP nonfarm payrolls report for November.
The Bank of Canada is to announce its benchmark interest rate and publish a rate statement.
Thursday, December 7
Australia is to release data on the trade balance.
Canada is to report on building permits and publish the Ivey PMI.
The U.S. is to produce the weekly report on jobless claims.
ECB President Mario Draghi is to speak in Frankfurt.
Friday, December 8
Japan is to release revised data on third quarter growth.
Australia is to release data on home loans.
China is to publish trade data.
The UK is to report on manufacturing production and the trade balance.
The U.S. is to round up the week with the non-farm payrolls report for November and preliminary data on consumer sentiment.