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Forex - Weekly outlook: May 9-13

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Forex Pros - Last week saw the euro post its worst weekly performance against the U.S. dollar in four months, after European Central Bank President Jean-Claude Trichet indicated that he may not raise interest rates next month and after reports that Greece may withdraw from the euro zone.

The single currency pulled back from a 17-month high of 1.4939 hit Wednesday to trade at 1.4318 by close of trade on Friday, tumbling 3.3% over the week.

On Friday, Germany's Spiegel magazine reported that euro zone finance ministers were meeting to discuss Greece, including the issue of its possible exit from the currency bloc. The report was subsequently denied by German and Greek officials but this failed to arrest the euro's sharp decline.

The euro began its two-day decline on Thursday after ECB President Jean-Claude Trichet refrained from using the phrase "strong vigilance" on higher prices, which may have signaled a June rate hike. He instead said inflation risks will be watched "very closely."

Meanwhile, the dollar was boosted after official data showed that U.S. nonfarm payrolls rose by 244,000 in April, as the private sector posted the strongest employment gain in five years.

A separate report showed that the U.S. unemployment rate rose to 9.0% last month from 8.8% in March. It was the first increase in the jobless rate since November, when it hit 9.8%. Economists had forecast that payrolls would rise by 185,000 and that the jobless rate would remain unchanged at 8.8%.

The dollar rebounded against the yen following the data, after touching 79.56 on Thursday, the lowest level since March 18, when the G7 nations and Japan mounted a coordinated intervention to curb the yen's gains after Japan's earthquake, tsunami and nuclear scare.

Also last week, a sharp sell-off in commodities saw the commodity linked Australian, Canadian and New Zealand dollars decline broadly. Australia's dollar retreated from a post-float high of 1.1011 before trimming losses on Friday, amid expectations for further rate hikes by the Reserve Bank.

In the week ahead, investors will be looking towards U.S. data on retail sales and inflation to gauge the strength of the U.S. economic recovery while the euro zone is to release preliminary data on gross domestic product on Friday.

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

Monday, May 9

The Bank of Japan is to publish the minutes of its most recent monetary policy meeting, which provide investors with in-depth insights into the economic conditions that influenced the rate setting decision. Meanwhile, Australia is to publish data on the number of new jobs advertized, an important gauge of the jobs market.

Also Monday, the euro zone is to publish a report on investor confidence while Germany is to publish official data on its trade balance, the difference in value between imported and exported goods and services.

Later in the day, Canada is to publish government data on housing starts, a leading indicator of economic health.

Tuesday, May 10

Switzerland is to publish official data on consumer price inflation, which accounts for a majority of overall inflation, as well as a government report on consumer climate, a leading indicator of consumer spending.

Meanwhile, the U.K. is to publish industry reports on retail sales and house prices, important indicators of economic health.

Australia is to publish official data on its trade balance as well as a report on business confidence. Later in the day, the country's Treasury is to announce the details of its annual budget. Also Tuesday, the Reserve Bank of New Zealand is to publish its financial stability report.

In addition, the U.S. is to release official data on import prices, economic optimism and wholesale inventories.

Wednesday, May 11

The U.K. is to publish official data on its trade balance, the difference in value between imported and exported goods and services. Meanwhile, the governor of the Bank of England Mervyn King is to hold a press conference to discuss the banks inflation report, which contains the BoE's projection for inflation and economic growth over the next two years.

Later in the day, Canada and the U.S. are both to publish official data on their trade balances. In addition, the U.S. is to publish government data on crude oil inventories and the federal budget balance.

Thursday, May 12

The U.S. is to publish a weekly report on initial jobless claims as well as official data on producer price inflation, a leading indicator of consumer inflation. The country is also to publish government data on retail sales, the primary gauge of consumer spending, which accounts for the majority of overall economic activity.

Later in the day, Federal Reserve Chairman Ben Bernanke is to testify before the Senate Banking Committee in Washington.

The euro zone is to publish official data on industrial production, while France is to publish a report on consumer price inflation. Meanwhile, the ECB is to publish its monthly bulletin, which provides detailed analysis of current and future economic conditions from the bank's viewpoint.

In the U.K., the National Institute of Economic and Social Research is to publish its monthly estimate of gross domestic product, in an effort to predict the quarterly government data. The U.K. is also to publish government data on manufacturing production, a leading indicator of economic health.

Elsewhere, Australia is to release official data on employment change and the country's unemployment rate, a leading indicator of economic health, while Canada is to produce data on new home prices.

Also Thursday, Japan is to produce preliminary data on machine tool orders as well as official data on its economy watchers sentiment survey, which monitors consumer spending.

Friday, May 13

The euro zone is to publish preliminary data on GDP, the broadest measure of economic activity and the primary gauge of the economy's health. Meanwhile, ECB President Jean-Claude Trichet is to speak at a conference in Madrid; his comments will be closely watched for any clues to the future possible direction of monetary policy.

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

The U.S. is to round up the week with official data on consumer price inflation while the University of Michigan is to publish 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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