Forex - Weekly outlook: 04.23 - 04.27
Investors will be awaiting an update on the health of the U.S. and UK economies this week ahead of Friday’s data on first quarter growth. Monetary policy meetings in the euro zone and Japan will also be in focus.
The European Central Bank is widely expected to leave monetary policy unchanged after its meeting on Thursday, but investors will be on the lookout for signs that the bank is moving closer to exiting its stimulus program.
The dollar rose to two week highs against a currency basket on Friday, boosted by expectations for a faster pace of rate hikes by the Federal Reserve this year while dovish comments by central bank officials weighed on sterling and the euro.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was up 0.49% at 90.08 late Friday, after rising as high as 90.25 earlier, the most since April 6. For the week, the index was up 0.65%.
Cleveland Fed President Loretta Mester said Thursday that steady interest-rate rises are needed this year and next to keep the economy from overheating.
Her comments boosted expectations that the Fed will raise rates at a faster pace than markets currently expect this year.
Expectations of higher interest rates tend to boost the dollar by making the currency more attractive to yield-seeking investors.
Sterling fell to fresh two-week lows against the dollar on Friday after Bank of England Governor Mark Carney indicated that the central bank may not raise interest rates in May, in the wake of recent “mixed” economic data.
GBP/USD was down 0.6% at 1.4001 late Friday, for a weekly decline of 1.71%.
Earlier in the week the pound had surged to a post Brexit high of 1.4376 before weaker-than-expected wage growth and inflation data tempered rate hike bets.
The euro plumbed two-week lows against the dollar on Friday after ECB President Mario Draghi reiterated that the bank would be cautious about removing monetary stimulus.
EUR/USD was down 0.47% at 1.2288 in late trade, after falling as low as 1.2250 earlier, for a weekly loss of 0.36%.
The dollar was higher against the yen, with USD/JPY rising 0.28% to 107.65, after hitting a two-month high of 107.86 earlier.
The Australian and New Zealand dollars fell to two-week lows, pressured lower by declining Chinese stocks, which have been hit by lingering worries over the simmering trade tensions between the U.S. and China.
AUD/USD was down 0.74% to 0.7671 late Friday, while NZD/USD lost 0.89% to trade at 0.7205.
Investors will continue to monitor trade and geopolitical developments in the coming week.
Monday, April 23
The euro zone is to release data on manufacturing and service sector activity.
The U.S. is to report on existing home sales.
Bank of Canada Governor Stephen Poloz is to testify before the House of Commons finance committee in Ottawa.
Tuesday, April 24
Australia is to release data on inflation.
The Ifo Institute is to report on German business climate.
The U.S. is to release data on consumer confidence.
Wednesday, April 25
Financial markets in Australia will remain closed for a holiday.
BoC Governor Stephen Poloz is to testify before the Senate banking committee in Ottawa.
Thursday, April 26
The ECB is to announce its latest monetary policy decision. The announcement is to be followed by a press conference with President Mario Draghi.
The U.S. is to release reports on durable goods orders and initial jobless claims.
Friday, April 27
South Korean President Moon Jae-in and North Korean leader Kim Jong Un are expected to hold a summit meeting to discuss de-nuclearization and a peace treaty.
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.
Swiss National Bank Chairman Thomas Jordan is to speak at an event in Bern.
The UK is to release preliminary data on first quarter economic growth as well as revised data on consumer sentiment.
The U.S. is to publish advance data on first quarter growth.
Bank of England Governor Mark Carney is to speak at an event in London.