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Forex - Weekly outlook: July 8 - 12

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Investing.com - The dollar rallied to five-week highs against the yen and six-week highs against the euro on Friday after stronger-than-forecast U.S. jobs data boosted expectations that the Federal Reserve will start to unwind its stimulus program by the year's end.

The Department of Labor said the U.S. economy added 195,000 jobs in June, more than the 165,000 increase forecast by economists. May's figure was revised up to 195,000 from a previously reported 175,000. The unemployment rate remained unchanged at 7.6% in June.

The euro fell to session lows of 1.2807 against the dollar, the pair's lowest since May 17 before settling at 1.2834, down 0.62% for the day and 1.35% lower for the week.

The dollar rose to highs of 101.23 against the yen, the highest level since May 31, before settling at 101.17, up 1.13% for the day, extending the week's gains to 1.72%.

The dollar hit four month highs against the pound, with GBP/USD falling to lows of 1.4859, the lowest since March 12, before settling at 1.4895, down 1.18% for the day, bringing the week's losses to 2.07%.

The euro and the pound fell sharply against the dollar on Thursday after the European Central Bank and the Bank of England adopted a dovish stance on interest rates and took steps to give forward guidance to markets.

Speaking at the bank's post policy meeting press conference, ECB President Mario Draghi said the bank expects to maintain interest rates at current or lower levels for an "extended" period of time.

Draghi said the decision to give forward guidance on interest rates was taken unanimously by policymakers and was "a very significant step forward" for the ECB.

The ECB left interest rates on hold at record lows of 0.5%.

The BoE also left its benchmark interest rate unchanged at 0.5% on Thursday and said economic data over the past few months was consistent with the recovery set out by the bank in its May inflation report, but warned that the "significant upward movement" in bond yields would weigh on the outlook for growth.

"In the Committee's view, the implied rise in the expected future path of Bank Rate was not warranted by the recent developments in the domestic economy", the BoE said.

The BoE took the unusual step of publishing a rate statement despite making no change to monetary policy, following its first meeting under the leadership of new Governor Mark Carney.

Elsewhere, the greenback rose to fresh 21-month highs against the Canadian dollar on Friday, despite the release of better-than-expected Canadian jobs data.

Statistics Canada said the economy lost 300 jobs in June, compared to forecasts for a decline of 3,000, while the unemployment rate remained unchanged at 7.1%.

USD/CAD rose to session highs of 1.0609, before settling at 1.0573, up 0.55% for the day and gaining 0.48% for the week.

In the week ahead, investors will be looking ahead to Wednesday's minutes of the Federal Reserve's June meeting, as well as Friday's closely watched data on U.S. consumer sentiment. The outcome of Thursday's Bank of Japan policy meeting will also be in focus.

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

Monday, July 8

Japan is to release official data on the current account and bank lending.

Switzerland is to publish government data on the unemployment rate.

In the euro zone, Germany is to produce official data on industrial production, a leading indicator of economic health, as well as data on the trade balance.

The eurogroup of euro zone finance ministers are to hold talks in Brussels.

ECB President Mario Draghi is to appear before the committee on Economic and Monetary Affairs in the European Parliament in Brussels.

Later Monday, Canada is to publish government data on building permits, a leading indicator of future construction activity. The Bank of Canada is to release its quarterly business outlook survey.

Tuesday, July 9

New Zealand is to release private sector data on business confidence, a leading indicator of economic health, while Australia is to publish a report on business confidence.

China is to produce official data on consumer price inflation, which accounts for the majority of overall inflation.

Switzerland is to publish official data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity.

The U.K. is to release official data on manufacturing production, as well as data on the trade balance.

Finance ministers from the European Union are to hold talks in Brussels.

Wednesday, July 10

The Bank of Japan is to release monetary policy meeting minutes, which provide insights into economic conditions from the bank's perspective. Japan is also to produce official data on tertiary industry activity.

Australia is to publish a report on consumer sentiment, a leading indicator of consumer spending.

In the euro zone, France and Italy are to release official data on industrial production.

Later Wednesday, the Federal Reserve is to publish the minutes of its latest policy setting meeting. Meanwhile, Fed Chairman Ben Bernanke is to speak.

Thursday, July 11

New Zealand is to release private sector data on manufacturing activity, a leading economic indicator.

Australia is to produce official data on the change in the number of people unemployed and the unemployment rate.

The BoJ is to announce its benchmark interest rate. The announcement is to be accompanied by the bank's monetary policy statement, which contains important insights into the economic outlook. The BoJ is to hold a press conference after the rate announcement.

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

The ECB is to publish its monthly bulletin, which outlines the bank's economic outlook.

Canada is to release official data on new house price inflation, an important indicator of demand in the housing sector.

The U.S. is to release the weekly government report on initial jobless claims, a leading economic indicator, as well as official data on import prices.

Friday, July 12

Australia is to publish official data on home loans, a leading indicator of demand in the housing sector.

The euro zone is to release official data on industrial production.

The U.S. is to round up the week with official data on producer price inflation and preliminary data from the University of Michigan on consumer sentiment.

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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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