Forex Weekly Outlook December 19-23 2011

The US dollar reached levels last seen in January, as the European troubles continued. The week before Christmas will likely see lower volume, but there still quite a few interesting events on the agenda, with US home sales and durable goods orders being the highlights. Here is an outlook for the main market movers awaiting us this week.

Last week US unemployment claims dropped to a three year low with 366,000 initial jobless claims suggesting a real recovery trend in the job market. Another surprise coming from the Euro-Zone with an unexpected improvement in the PMI; French Flash Services  rose above the 50 point line and Germany service sector expanded to 52.7 from 50.3. Will these encouraging trends continue this week?  Let’s Start

1. Mario Draghi speaks: Monday, 15:30.   Mario Draghi, president if the ECB is scheduled to speak in Brussels   at Quarterly Hearing before European Parliament Economic and Monetary Affairs Committee. Pressure is mounting on him to release the printing presses of the ECB – something he clearly rejected. Will he provide hints on the conditions?
2. Euro-Zone German Ifo Business Climate: Tuesday, 9:00. German business sentiment increased unexpectedly in November reaching 106.6 from106.4 in October, while economists expected a drop to 105.3. The climb suggests things may not be so bad in the Euro-Zone. German economy still functions with a stable domestic demand indicating it may avoid recession in the coming months. A small drop to 106.2 is predicted now.
3. Canadian inflation data: Tuesday, 12:00.  Canadian core consumer price index increased by 0.3% month amid higher prices in restaurants, automobiles and automobile insurance. CPI increased by 0.2% as in September induced by higher prices in energy and food products. The BOC predicts headline inflation will reach 1.0% in 2012 and 2.0% in 2013. Core CPI is expected to grow by 0.2% while CPI is expected to increase by 0.3%.
4. US Building Permits: Tuesday, 13:30. The annual rate of building permits for new residential construction edged up to653,000 in October following September’s annual rate of 589,000. This rise contradicts the standstill situation in housing starts giving mixed signals on the US housing market. A small decline to 630,000 is forecast.
5. Japan rate decision: Wednesday. The Bank of Japan kept its overnight call rate at 0.10% in line with predictions and maintained its loose monetary policy to encourage economic recovery. The BOJ downgraded its economic assessment and cautioned about the slow pace of Japan’s economic growth in light of global uncertainties and the strong yen. No change is forecast.
6. US Existing Home Sales: Wednesday, 15:00. Sales of existing homes in the U.S. increased unexpectedly by 1.4% to 4.97 million in October suggesting improvement in the housing market after a drop in prices and low borrowing costs. Economists expected a reading of 4.82 million. A further increase to 5.04 million is expected now.
7. New Zealand GDP: Wednesday, 21:45.New Zealand’s economy almost stopped growth in the second quarter expanding by a mere 0.1% following the robust 0.9% growth in the first quarter. Housing market and the manufacturing sector remained weak. However domestic demand has increased in the second half of the year on Christchurch earthquake reconstruction work and the Rugby World Cup boosting the local economy.
8. US Unemployment Claims: Thursday, 13:30. The number of Americans filing initial claims for unemployment benefits declined to a 3.5 year low reaching 366,000 well below the 389,000 expected and following385,000 in the week before. The reading suggests a real recovery on the labor market and improved condition in the US economy. A small increase to 376,000 is expected this week.
9. Canadian GDP: Friday, 13:30.Canada’s economy expanded by 0.2% in September a little slower than the 0.3% rise predicted and following an upwardly revised 0.4% gain in August. The annualized growth rate reached 3.0% in September beating the 2.7% rise in August. The manufacturing and service sectors expanded in the third quarter. A smaller increase of 0.1% is predicted.
10. US Core Durable Goods Orders: Friday, 13:30.U.S. core long lasting product orders increased more-than-expected in October rising by 0.7% well above the 0.1% increase expected and following 0.6% increase in the previous month. Durable goods orders including automobiles dropped by 0.7% after falling 1.5% in September.  Another increase of .0.5% is forecast .
11. US New Home Sales: Friday, 15:00. The number of U.S. new homes purchased increased to 307,000 from303,000 in September below the 313,000 forecast. Existing homes are still a better choice for buyers lured by excellent foreclosure deals. A climb to 314,000 is expected now.

*All times are GMT.

That’s it for the major events this week. Stay tuned for coverage on specific currencies

Further reading:

• 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 the New Zealand Dollar (kiwi), read the  NZD forecast.
• For USD/CAD (loonie), check out the  Canadian dollar
• For the Swiss Franc, see the  USD/CHF forecast.