The US dollar and Japanese yen retreated across the board. The elections over the weekend in Japan will set the tone for the yen. In addition, US housing data, GDP in New Zealand and in Canada are the main events on our calendar this week. Here is an outlook on the major events ahead.
Last week the FOMC announced new policy measures to boost the US market by enhancing monthly acquisitions of $45 billion totaling$85 billion. The new program aims to replace Operation Twist expiring at the end of the month. Likewise the FOMC decided to maintain rates at 0 to 0.25% until the unemployment rate declines to 6.5% and as long as inflation remains low. Will Bernanke succeed to increase the pace of recovery in the US market? Let’s Start
- Elections in Japan: Sunday. Japanese citizens will go to the polls and elect 480 representatives for the lower house of parliament, Diet. Opposition leader Shinzo Abe of the LDP is set to win and become the Prime Minister. His party is expected to win an absolute majority, and could have a two thirds majority together with another coalition partner. This will make it easier to pass laws. Abe plans to raise the inflation target and to start new stimulus. The yen has already weakened a lot towards these elections and could further weaken. See potential currency reactions.
- UK inflation data: Tuesday, 9:00. British inflation surged in October to a five month high of 2.7%, amid a rise in university fees and food prices, following a 2.2% in September. This reading further distances UK from the BOE 2.0% target rate and may compel the MPC to raise interest rates sooner than planned. A small decline to 2.6% is anticipated.
- German Ifo Business Climate: Wednesday, 9:00. German Manufacturer’s Climate increased unexpectedly in November to 101.4 from 100.0 registered in October, above predictions of a 99.5 score, amid a slight advance in Current conditions and a more noticeable improvement concerning future business developments. A rise to 101.9 is expected this time, after ZEW also reported a nice rise.
- US Building Permits: Wednesday, 13:30. The number of building permits issued in October reached 866,000 following a nice climb of 890,000 in September, indicating the housing sector remains strong with 18 months of an annual increase. Despite the growth trend, both building permits and housing starts figures are below historical levels. The number of building permits is expected to remain at 870,000.
- NZ GDP: Wednesday, 21:45. NZ second quarter growth rate climbed 0.6% beating predictions for a 0.4% rise, following 1.0% expansion rate in the first quarter. On a yearly base, GDP grew 2.6% on the year. Another expansion of 0.5% is forecasted.
- Japan rate decision: Thursday. The Bank of Japan left its interest rates unchanged on its November meeting and continued to expand its bond-buying program, in line with predictions. More QE is expected. Note the proximity of this decision to the elections. The BOJ may want to show it is still independent.
- US Unemployment Claims: Thursday, 13:30. The number of Americans filing initial claims for unemployment benefits edged down 29,000 last week to a near four-year low of 343,000. This is the fourth straight week of declines, indicating the US labor market is steadily improving. A slight increase to 350,000 claims is expected this time.
- US Existing Home Sales: Thursday, 15:00. Sales of previously owned U.S. homes unexpectedly surged in October to a 4.79 million annual rate, amid record-low mortgage rates and subdued house prices, boosting the housing market. The reading beat predictions for a 4.76 million units. A rise to 4.85 million is forecasted now.
- US Philly Fed Manufacturing Index: Thursday, 15:00. Manufacturer’s activity in the Philadelphia region declined sharply in November, dropping to -10.7 after a 5.7 reading in the previous month, in light of Hurricane Sandy disrupting work in southern New Jersey, reflected by a big draw for inventories, a slowing in delivery times, and weaker employment. An improvement to -1.8 is expected.
- Canadian GDP: Friday, 13:30. Economic activity was unchanged in September following a 0.1% decline in August. This weak data closed a sluggish third quarter which may also affect the fourth quarter growth rate, postponing the BOC’s plans for tightening measures. A small increase of 0.1% is forecasted.
- US Core Durable Goods Orders: Friday, 13:30. After two months of upward swings spurred by aircraft-driven orders, Durable orders stabilized in October, with an unchanged reading. However excluding transportation , new orders edged up 1.5% in October, beating predictions for a 0.5% decline. Gains were broad based which is a good sign for the US manufacturing sector. Core orders are expected to decline 0.1% this time.
*All times are GMT.
That’s it for the major events this week. Stay tuned for coverage on specific currencies.
- For EUR/USD, check out the Euro to Dollar forecast.
- For the Japanese yen, read the USD/JPY forecast.
- For GBP/USD (cable), look into the British Pound forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- For USD/CAD (loonie), check out the Canadian dollar