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Forex - Weekly outlook: August 15 - 19

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Forexpros - Friday brought an end to a tumultuous and volatile week in markets, highlighted by an historic downgrade to the U.S. credit rating and heightened concerns over sovereign debt contagion in the euro zone, while the franc tumbled amid speculation the Swiss National Bank will take further action to weaken the currency.

On Monday, market sentiment was rattled after ratings agency Standard and Poor's downgraded the U.S. sovereign debt rating by one notch to AA+ from AAA after markets closed last Friday.

The ratings agency kept the rating outlook at negative, suggesting a further downgrade could be possible within the next 12 to 18 months.

The downgrade prompted investors to shun riskier assets, such as stocks and high yielding currencies, and flock to traditional safe haven assets like the yen, Swiss franc and gold.

The Federal Reserve pledged on Tuesday to keep its benchmark interest rate at an all-time low, adding that it will maintain a loose monetary policy until "at least through mid-2013."

In a statement, the Fed said growth was much slower than expected and the labor market had deteriorated, underlining concerns over the U.S. economic outlook.

On Wednesday, risk appetite crumbled as fears grew that the euro zone's debt crisis could spill over to the region's banking sector, while speculation over a French sovereign debt downgrade raised concerns over the health of major French lenders, particularly Societe Generale.

Meanwhile, the Swiss National Bank announced that it would take additional measures, including increasing liquidity to the money market and conducting foreign exchange swap transactions to curb strong gains in the Swissie.

The Swissie came under further selling pressure on Thursday amid speculation the SNB might peg the franc to the euro, while risk sentiment was boosted after official data showed that U.S. initial jobless claims fell to a four-month low in the preceding week.

On Friday, government data showed that U.S. retail sales rose 0.5% in July, the biggest gain in four months.

However, concerns over the U.S. economic outlook remained after the University of Michigan's preliminary index of consumer sentiment plunged to a three-decade low in August.

Meanwhile, several European governments, including France, Italy and Spain imposed bans on short selling of financial stocks on Friday in an effort to stem recent volatility in Europe's financial sector.

Looking ahead to the coming week, U.S. data on consumer price inflation will be a major focus of attention, while Tuesday's meeting between German Chancellor Angela Merkel and French President Nicolas Sarkozy will also be in focus.

Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets.

Monday, August 15

Japan is to publish preliminary data on gross domestic product, the broadest measure of economic activity and the primary gauge of the economy's health.

Australia is to produce official data on new vehicle sales, an important indicator of consumer confidence.

The U.K. is to publish industry data on house price inflation, a leading indicator of the housing industry's health.

Meanwhile, in the euro zone, markets in France and Italy are to remain closed for national holidays, while Switzerland is to release government data on producer price inflation, a leading indicator of consumer price inflation.

Later in the day, the U.S. is to produce official data on manufacturing activity in New York State and a report on the balance of domestic and foreign investment in the U.S.

Tuesday, August 16

The Reserve Bank of Australia is to release the minutes of the most recent policy-setting meeting. The minutes give an in-depth insight into the decision on where to set interest rates.

The U.K. is to produce official data on consumer price inflation, which accounts for a majority of overall inflation, while the Bank of England is to publish its inflation letter.

The euro zone is to publish preliminary data on GDP, while Germany is also to publish a report on economic growth. The single currency bloc will also produce data on its trade balance.

Elsewhere, Canada is to release government data on manufacturing sales, a leading indicator of economic health.

Later in the day, the U.S. is to publish official data on building permits, an excellent gage of future construction activity, as well as data on housing starts. The U.S. is also to release data on import prices, the capacity utilization rate and industrial production, a leading indicator of economic health.

Wednesday, August 17

New Zealand is to publish official data on producer price inflation input, a leading indicator of consumer inflation. Elsewhere, Australia is to publish official data on wage costs as well as a report on a leading index designed to predict the future direction of the economy.

The euro zone is to release official data on consumer price inflation, which accounts for a majority of overall inflation as well as data on the region's current account.

Meanwhile, the U.K. is to produce government data on claimant count change, a leading indicator of economic health, as well as data on average earnings and the overall unemployment rate.

In addition, the Bank of England is to release the minutes of the most recent policy-setting meeting. The minutes give an in-depth insight into the decision on where to set interest rates.

Elsewhere, Canada is to release data on foreign securities purchases, which is closely linked to currency demand.

Later Wednesday, the U.S. is to publish official data on producer price inflation, a leading indicator of consumer inflation, as well as government data on crude oil stockpiles.

Thursday, August 18

Japan is to publish official data on its trade balance, the difference in value between imported and exported goods and service over the month.

The U.K. is to produce government data on retail sales, the primary gauge of consumer spending, which accounts for the majority of overall economic activity.

Later in the day, Canada is to publish official data on wholesale sales, a leading indicator of consumer spending, as well as an index of leading economic indicators, designed to predict the future direction of the economy.

Meanwhile, the U.S. is to publish a flurry of economic data with government reports on initial jobless claims, consumer price inflation, existing home sales, manufacturing activity in Philadelphia as well as a report on natural gas stockpiles.

Friday, August 19

New Zealand is to produce data on visitor arrivals and credit card spending.

In the euro zone, Germany is to publish official data on producer price inflation, a leading indicator of consumer price inflation. Elsewhere, the U.K. is to produce data on public sector net borrowing.

Meanwhile, Canada is to round up the week with government data on consumer price inflation, which accounts for a majority of overall inflation.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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