The European debt crisis worsened, and a credit crunch is now feared. This resulted in a stronger greenback. US GDP figures, Unemployment claims and German Ifo Business Climate are the major events this week. Here is an outlook on the main market-movers ahead.
Apart from Germany,a bond sell off was seen in every European country. Will German bonds sell as well? Will the benchmark break? If this happens, the euro’s losses will accelerate. Last week Weekly jobless claims dropped to 388K indicating a gradual improvement in the US job market. Most other US figures were upbeat. These favorable figures give room for cautious optimism in light of the global financial turmoil. Will this improvement continue?
- US Existing Home Sales: Monday, 15:00. Sales of existing homes dropped to a seasonally adjusted annual rate of 4.91 million from 5.06 million in August, a little below the 4.94 million predicted. These readings indicate that the slowdown in the housing market is continuing, partly due to tougher loan limits reducing the number of potential buyers. A small drop to 4.84 million is expected now.
- US GDP (second release): Tuesday, 13:30. According to the first release, the US economy grew at a pace of 2.5% in Q3, faster than the very poor growth seen earlier in the year. This growth rate will likely be confirmed in the second release (or first revision). Any result will rock the markets, at a time when a global recession is feared.
- US FOMC Meeting Minutes: Tuesday, 19:00. After pledging to keep rates low and launching Operation Twist, the last rate decision included no policy changes, even though one member wanted more monetary stimulus. What were the other member suggesting? What is awaiting us in the next meeting? This will be revealed in the minutes.
- US Core Durable Goods Orders: Wednesday, 13:30. Orders of long lasting products, excluding transportation items, climbed 1.7% in September, above the 0.5% increase predicted. The increase occurred amid a government tax break and a 14% decrease in the value of the dollar which helped boost the US economy. August figures revealed a 0.4% decline. A small increase of 0.2% is expected now.
- US Unemployment Claims: Wednesday, 13:30. The US job market is improving gradually as the number of people filing initial claims for unemployment benefits dropped to 388,000 last week below the 400,000 line and393,000 in the previous week. In case the number of claims succeeds to remain below 375,000 and Unemployment rate lower than 9.0%, we will witness a major improvement in the US Job market.
- Euro-zone German Ifo Business Climate: Thursday, 9:00. German business sentiment dropped further, for the fourth month in October, reaching 106.4 after107.4 in September. These declines reflect the fear of businesses from a steep slowdown in the European economy. Nevertheless, German economy is in no fear of entering a recession. Another drop to 105.7 is forecasted.
- UK Revised GDP: Thursday, 9:30. After a very slow second quarter, the initial estimation of Q3 growth saw a rate of 0.5%. Is Britain recovering, or is this temporary? This second release will likely confirm the growth rate. Note that there is one more revision scheduled.
*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 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.