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The dollar strengthened quite nicely, with the exception of the loonie, as the US economy and the Fed remain firmly on track.  Euro-zone inflation data, US, UK and Canadian GDP data, US Durable Goods Orders,  and housing data are the most important economic releases in the last week of the month. Here is an outlook on the highlights coming our way.

The  FOMC Meeting Minutes release showed that while the  Fed is concerned with low inflation expectations and was united around leaving the “considerable time” phrase regarding rates unchanged, global economic issues such as the weakening in Europe, China and Japan are seen to have a limited  impact on the US. Most indicators  in the US were quite upbeat: inflation firmed more than expected, and so did existing home sales, building permits and the Philly Fed Index. Japan unexpectedly fell into a recession after contracting in Q3, and the country is going to the polls in December. The yen reached new lows. In the euro-zone, Draghi maintained the dovish tone and mentioned outright QE. His  comments weighed on the euro, as did weak PMIs. The pound received  good news from stronger than expected inflation and retail sales, as well as a more hawkish stance from the BOE. Inflation was also upbeat in Canada, and the Aussie got a boost from a rate cut in China  but still  remained down on the week. What’s next for currencies?

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  1. German Ifo Business Climate: Monday, 9:00. German business sentiment declined for the sixth month in October, reaching 103.2 after September’s reading of 104.7. Economists expected a smaller decline to 104.6. Growth in the third quarter was worse than expected with a predicted gain of 0.3%. The survey revealed a drop in current conditions to 108.4 from 110.5 in September and the outlook gauge declined to 98.3 from 99.2. Analysts predict business climate will reach 103 in November.
  2. Haruhiko Kuroda speaks: Tuesday, 0:00, 4:45. BOE Governor Haruhiko Kuroda will speak in Nagoya and in Tokyo. Kuroda warned inflation could fall below 1% the disappointing GDP release in November showing the economy slid into recession. BOE Governor started to implement the unprecedented asset purchases decided in the last policy meeting, despite Prime Minister Shinzo Abe’s decision to delay a sales-tax increase. Kuroda may provide clues on further easing measures to boost inflation towards the 2% target.
  3. US GDP data: Tuesday, 13:30. The first release of US GDP showed an annualized growth rate of 3.5%, which was above expectations. While it came on top of a gain in government spending, it sill showed that the economy is growing at an above-average rate. Economists expect GDP to be revised down to  3.3%.
  4. US CB Consumer Confidence: Tuesday, 13:30. U.S. consumer confidence jumped  up strongly in October, hitting a seven-year high of 94.5 from 89 in the previous month amid a further improvement in the Job market raising expectations for higher economic growth. In light of falling gas prices and better job figures, consumer spending is expected to rise in the coming months. U.S. consumer sentiment is predicted to rise to 95.9 this month.
  5. UK GDP data: Wednesday, 9:30. According to the initial release, the pace of quarterly growth slowed down to 0.7% in Q3, after reaching 0.9% in Q2. Economists expect the Ukraine crisis will have negative bearings on the manufacturing sector due to a reduction in foreign demand. However once tensions ease, business confidence and investment will rebound across  Europe, and the UK will return to full growth. The third quarter growth rate is expected to be confirmed in the second release at 0.7%.
  6. US Durable Goods Orders: Wednesday, 13:30. Orders for long lasting goods fell unexpectedly by 1.3% in September, while expected to gain 0.4%. Excluding transportation orders, durable goods orders declined 0.2% and fell 1.5% excluding defense orders. Nondefense new orders for capital goods in September fell 5.4%, while defense new orders for capital goods rose 7.4%.  However, the general trend is positive showing a stronger market demand, while aircraft orders tend to be less trustworthy. Analysts expect a decline of 0.4% in Durable Goods Orders and a 0.5% gain in core orders.
  7. US Unemployment Claims: Thursday, 13:30. The number of Americans filing claims for unemployment benefits fell last week to 291,000 from 293,000 in the week before. Economists expected a sharper decline to 286,000. The reading continues to suggest an ongoing improvement in the US labor market. The four-week moving average, a more stable gauge, increased 1,750 to 287,500, still showing job growth. Economists forecast 287,000 new claim this week.
  8. US New Home Sales: Wednesday, 15:00. Sales of new U.S. single-family homes reached a six-year high in September, rising to a seasonally adjusted annual rate of 467,000. Economists expected an even higher reading of 473,000. August’s reading was sharply revised for the worse to 466,000, indicating the housing recovery remains uncertain. The housing market regained momentum after stalling in the second half of 2013 when mortgage rates soared. Mortgage rates have declined hand in hand with the contraction in the U.S. Treasury debt yields, but slow wage growth weighs on the pace of recovery. Analysts expect new home sales to reach 471,000.
  9. Euro-zone inflation data: Friday, 10:00. Inflation in the euro-zone is very low and has remained at low levels for a long time, triggering quite a lot of action from the ECB. The  preliminary numbers for November are expected to show a drop in headline inflation, from 0.4% to 0.3%, partly due to the fall in oil prices. Core inflation is predicted to remain at 0.7% for another week in a row.
  10. Canadian GDP: Friday, 13:30.  Canada’s economy contracted unexpectedly 0.1% in August, declining for the first time in eight months, amid a decline in energy and manufacturing activity. Economists expected a flat reading as in the previous month. The disappointing figure suggests pickup has stalled in the third quarter. Manufacturing output fell 1.2%, reversing the 1.2% gain in the prior month. Service industries gained 0.2% for the month, with wholesale trade gaining 0.5% and the finance and real estate sectors both rising 0.3% in August. Retail activity, however, declined 0.1% and transportation and warehouses dropped 0.3%. Economists forecast a 0.4% gain in September.

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

*All times are GMT.

In our latest  podcast, we talk about the state of US housing, run down the FOMC  minutes, the  Japanese jump, the Draghi drama and also talk oil:

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