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Forex - Weekly outlook: August 8 – 12

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Forexpros - Last week saw the U.S. dollar advance against most of its major counterparts, as concerns over the U.S. economic recovery and fears over sovereign debt contagion in the euro zone boosted demand for safe haven assets, while the Swiss National Bank and the Bank of Japan took action to weaken their respective currencies.

After markets closed Friday, ratings agency Standard and Poor's downgraded the U.S. sovereign debt rating by one notch to AA+ from AAA, and kept the rating outlook at negative, suggesting a further downgrade could be possible within the next 12 to 18 months.

Meanwhile, the U.S. Department of Labor said on Friday that nonfarm payrolls rose by 117,000 in July, above expectations for an increase of 95,000, while the previous month's figure was revised up to a gain of 46,000 from a previously reported 18,000.

The unemployment rate dipped unexpectedly to 9.1% from 9.2%, the first decline in four months.

The better-than-expected jobs data failed to ease fears that the U.S. economic recovery was stalling, after a flurry of weak data earlier in the week fuelled concerns over a possible double-dip recession.

In the euro zone, the European Central Bank said it would begin buying Italian and Spanish government bonds in exchange for fiscal reforms, in an attempt to ease investors concerns over the region's ongoing debt crisis.

Italian Prime Minister Silvio Berlusconi said Friday that the country will accelerate austerity measures and introduce a balanced budget rule to bring down the country's debt by 2013.

The ECB said on Thursday that it was buying government bonds from recently bailed-out nations Ireland and Portugal, following a four-month lapse.

Elsewhere, the yen weakened broadly after the Bank of Japan intervened in currency markets to curb the yen's sharp gains and support its predominantly export-led economy.

The Japanese intervention came one day after the Swiss National Bank cut its key lending rate to a narrower range calling the Swiss franc "massively overvalued."

Meanwhile, the Canadian, New Zealand and Australian dollars came under pressure as ongoing concerns over the global economic outlook curbed demand for growth-linked currencies.

In the week ahead, markets will get their first chance to react to the historic U.S. debt downgrade.

Traders will also be paying close attention to Tuesday's Federal Reserve rate announcement and its statement on monetary policy for any hints regarding further easing.

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

Monday, August 8

Australia is to publish a report on the change in the number of jobs advertized in the previous month. Japan is to publish a flurry of data, with reports on the country's current account, bank lending as well as an index of economic sentiment.

The euro zone is to publish a report on investor confidence, while Switzerland is to produce official data on the unemployment rate, an important signal of overall economic health.

Later in the day, the U.K. is to release industry data on retail sales and home prices.

Tuesday, August 9

Australia is to publish government data on home loans, a leading indicator of demand in the housing market, as well as a report on business confidence.

Meanwhile, the Bank of Japan is to release the minutes of its most recent policy meeting. The minutes give an in-depth insight into the economic conditions that influenced the interest rate decision. The country is also to publish government data on M2 money stock, household confidence and machine tool orders.

In the euro zone, Germany and France are to publish government data on their respective trade balances, the difference in value between imported and exported goods over the month.

Switzerland is to publish official data on consumer climate, a leading indicator of consumer spending.

The U.K. is to produce official data on manufacturing production, a leading indicator of economic health, as well as a report on its trade balance. Later in the day, the National Institute of Economic and Social Research is to publish its monthly estimate of monthly gross domestic product, in an effort to predict the quarterly government data.

Also Tuesday, the U.S. is to publish preliminary data on nonfarm productivity and labor costs, which are closely linked to consumer inflation.

In addition, the Federal Reserve is to announce the federal funds rate. The announcement will be followed by the bank's rate statement, which gives important insights into the economic conditions that influenced the rate decision.

Elsewhere, Canada is to release government data on housing starts, a leading indicator of health in the housing industry.

Wednesday, August 10

Japan is to publish official data on tertiary industry activity, a leading indicator of economic health.

Elsewhere, Australia is to publish an index of consumer sentiment, a leading indicator of consumer spending.

In the euro zone, France is to publish official data on industrial production, a leading indicator of economic health, while Germany is to release government data on consumer price inflation.

In the U.K., Bank of England Governor Melvyn King is to hold a press conference to discuss the bank's inflation report, which contains the bank's projection for inflation and economic growth over the next two years.

Later in the day, the U.S. is to produce data on the federal budget balance as well as reports on crude oil stockpiles and wholesale inventories.

Thursday, August 11

Australia is to publish government data on employment change and the unemployment rate, leading indicators of economic health, as well as a report on inflation expectations.

Meanwhile, New Zealand is to release data on manufacturing activity, while Japan is to publish a report on core machinery orders, a leading indicator of production.

Elsewhere, the European Central Bank is to publish its monthly bulletin, which gives a detailed analysis of current and future economic conditions from the bank's point of view.

The U.K. is to release industry data on a leading index designed to predict the direction of the economy.

Later in the day, the U.S. to publish official data on its trade balance, as well as a government report on initial jobless claims and natural gas stockpiles.

Canada is also to release a report on its trade balance, as well as data on new home price inflation, a leading indicator of the housing industry's health.

Friday, August 12

Japan is to release revised data on industrial production.

In the euro zone, France is to release preliminary data on gross domestic product and non-farm payrolls. The country is also to produce official data on consumer price inflation.

Also in Europe, Italy is to publish a report on its trade balance, while the single currency bloc is to produce official data on industrial production, a leading indicator of economic health.

The U.S. is to round up the week with government data on retail sales, the primary gauge of consumer spending, while the University of Michigan is to produce preliminary data on consumer sentiment and inflation expectations.

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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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