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Forex - Weekly outlook: January 14 - 18

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Investing.com - The euro rallied to a nine-month high against the U.S. dollar on Friday on signs that the crisis in the euro zone is abating, while the greenback hit 22-month highs against the yen as expectations for further easing by the Bank of Japan continued to weigh on the yen.

The euro extended a rally that began on Thursday after the ECB kept interest rates unchanged at 0.75% and said a gradual economic recovery would begin this year, as structural reforms and actions by the bank to tackle the debt crisis continued to take effect.

The euro had come under pressure ahead of the ECB meeting amid speculation that ECB President Mario Draghi could hint at possible rate cuts in the coming months.

The dollar hit its highest level since June 2010 against the yen on Friday, with USD/JPY rising 0.45% to settle at 89.17 after Japan's government approved a USD117 billion emergency stimulus package.

Japan's government, led by Prime Minister Shinzo Abe, also pledged to work more closely with the BoJ to combat deflation and spur growth, fuelling expectations that the central bank will implement more aggressive easing measures at its upcoming policy meeting later this month.

The euro hit 20-months highs against the broadly weaker yen on Friday, with EUR/JPY rallying 0.98% to settle at 118.98. Elsewhere, the single currency hit its highest level against the Swiss franc in over a year, with EUR/CHF up 0.47% to settle at 1.2185.

The dollar was little changed on Friday after official data showed that the U.S. trade deficit widened unexpectedly in November, growing to USD48.7 billion, the biggest deficit since April. Imports climbed 3.8% to USD231.3 billion, while exports rose 1% to USD182.6 billion.

The data came one day after government data showed that China's trade surplus widened unexpectedly in December, adding to signs of recovery in the world's second largest economy. Exports rose 14.1% in December from a year earlier while imports increased by 6%.

In the week ahead, investors will be anticipating a speech by Federal Reserve Chairman Ben Bernanke on monetary policy and the recovery from the global financial crisis on Monday, as well as Tuesday's data on U.S. retail sales for December.

Data from China on fourth quarter gross domestic product and industrial production will also be closely watched.

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

Monday, January 14

Markets in Japan will be closed for a national holiday. Australia is to publish a report on the change in the number of jobs advertised, a strong indicator of demand in the labor market.

The euro zone is to release official data on industrial production, while Italy is also to release a report on industrial production.

The Bank of Canada is to release its quarterly business outlook survey, a leading indicator of economic health.

In the U.S., Fed Chairman Ben Bernanke is to speak at the University of Michigan; his comments will be closely watched for any indications on the future possible direction of monetary policy.

Later Monday, New Zealand is to produce a report on business confidence.

Tuesday, January 15

The euro zone is to produce official data on the trade balance, the difference in value between imports and exports.

The U.K. is to release official data on consumer price inflation, which accounts for a majority of overall inflation, as well as industry data on house prices, a leading indicator of inflation in the housing market.

The U.S. is to publish government data on retail sales, the leading indicator of consumer spending, which comprises the majority of economic activity, as well as official data on producer price inflation. In addition, the U.S. is to release data on manufacturing activity in New York state and a report on business inventories.

Wednesday, January 16

Australia is to produce a report on consumer sentiment, a leading indicator of consumer spending, as well as government data on new vehicle sales.

Japan is to release official data on core machinery orders, a leading indicator of production.

The euro zone is to publish official data on consumer price inflation, while Germany is to hold an auction of 10-year government bonds. Elsewhere in Europe, Switzerland is to release official data on retail sales.

Later Wednesday, the U.S. is to produce government data on consumer inflation, in addition to data on industrial production and the capacity utilization rate. The country is also to publish official data on crude oil stockpiles, while the Fed is to publish its Beige Book, which looks at current economic conditions.

Thursday, January 17

Japan is release official data on tertiary industry activity, a leading indicator of economic activity.

Australia is to produce official data on the monthly change in the number of people claiming unemployment benefits and the unemployment rate, a leading indicator of economic health. The country is also to release a report on inflation expectations.

Switzerland is to publish government data on producer price inflation, a leading indicator of consumer inflation.

The ECB is to release its monthly bulletin, which contains the data policymakers evaluate when making the monthly interest rate decision.

Canada is to publish official data on foreign securities purchases, which is linked to currency demand.

Elsewhere, the U.S. was to produce official data on building permits, a leading indicator of future construction activity, as well as data on housing starts. The U.S. was also to release the weekly government report on initial jobless claims and data on manufacturing activity in Philadelphia.

Later Thursday, New Zealand is to publish official data on consumer price inflation.

Friday, January 18

China is to release official data on fourth quarter gross domestic product, the broadest measure of economic output and the leading indicator of growth. Beijing is also to release government data on industrial output, fixed asset investment and retail sales.

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

Later in the day, Canada is to publish official data on manufacturing sales, a leading indicator of economic activity.

The U.S. is to round up the week with preliminary data from the University of Michigan on consumer sentiment, a leading indicator of consumer spending.

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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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