Forex Weekly Outlook: October 10 to 14

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On Friday, the U.S. greenback dropped against a basket of major currencies, retreating from an over two month high after U.S. employment data for September disappointed analyst expectations, although the British pound dropped after what traders called a “flash crash” hit the currency to a 31-year low.

The Labor Department said Friday,the U.S. economy added  156,000 jobs the previous month, down from an increase of 167,000 in August, while the job loss rate marked up to 5%. Market analysts had projected 176,000 new jobs and the jobless rate to hold at 4.9 percent.

In spite of the uninspiring report, the decline was not anticipated to prevent  the Federal Reserve from increasing interest rates later this year. Markets are recently pricing in approximately 65%  possibility of a rate hike at December’s meeting, According  to the reports.

The U.S. dollar index, which gauges the greenback’s value compared to a basket of six major currencies, ended the week at 96.65, down 0.1% on the day. The index had surged to an over two month high of 97.21 prior the release of the U.S. jobs report.

During the week, the greenback increased1.3% during growing anticipations  the Federal Reserve would increase interest rates by the end of the year.

Compared to the yen, the greenback dropped approximately 1% to end at 102.91 by late trade Friday, off the prior session’s one month high of 104.16.

Temporarily, the euro inched up approximately 0.5% compared to the greenback to settle at 1.1201, off a two month decline of 1.1104 hit earlier.

Somewhere else, on Friday,  sterling grieved a dramatic decline of over  6% in Asian trading. Analysts did not exclude the possibility of a “fat finger”, or human mistakes, however, most speculated that it could have produced by algorithms picking up on statement from French President François Hollande, who took a rough position on the Brexit, with the move worsened by thin trade.

Following the initial crash, which took the pound to as low as 1.2035 against the greenback, the pair improved somewhat, with GBP/USD closing down  approximately 1.5% at 1.2436.

“The currency has been under heavy selling pressure in recent days on fears of the impact of Britain’s impending exit from the European Union,” according to the reports.

In the week onward, market participants will be turning their attention to Wednesday’s minutes of the Federal Reserve’s September policy meeting  for fresh clues on the schedule of the next U.S. rate hike.

U.S. retail sales data will also be in the limelight, as investors try to measure if the world’s biggest economy is strong enough to endure an increase in borrowing costs before the end of the year.

In addition, there are a handful of Fed speakers on tap, including Chair Janet Yellen, as traders look for additional clues on the likelihood of a December rate hike.

Somewhere else, China is to release what will be carefully observed trade, and inflation data during ongoing worries over the health of the world’s 2nd largest economy.

On Additional News

On Monday, October 10, Financial markets in Japan, the U.S. and Canada will stay closed for public holidays.

Temporarily, on Tuesday, Chicago Fed President Charles Evans will talk about monetary policy and the economy at 10:00PM ET (2:00GMT).

On October 11, Japan is to announce data on the current account. Australia is to issue private sector data on business confidence.

In the euro zone, the ZEW Institute is to report on German economic sentiment.

In the U.S., Minneapolis Fed President Neel Kashkari is to deliver comments at 11:00AM ET (15:00GMT).

Lastly, Fed Chair Janet Yellen is set to speak on “macroeconomic research after the crisis” at the Federal Reserve Bank of Boston’s Annual Research Conference at 1:30PM ET (17:30GMT).

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