Forex Weekly Outlook: Oct 24 to 28

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On Friday, the dollar recovered, reaching its highest levels since early February during heightened anticipations that the Federal Reserve will hike interest rates before the year end.

The U.S. dollar index, which gauges the greenback’s strong point against a trade-influenced basket of six major currencies, increased 0.34% at 98.62 late Friday. For the week, the index increased 0.7%.

The dollar supported after New York Fed President William Dudley stated Wednesday the U.S. central bank will likely increase interest rates later this year  if the economy stays on its current trajectory.

Increasing expectations that Hillary Clinton will win the U.S. presidential election have also added to the opinion that a December rate hike is possible.

The Fed’s next meeting is in November, however, a rate hike ahead of the presidential election is seen as doubtful.

Expectations for higher rates normally  increase the greenback by making it more attractive to yield seeking investors.

Investors have currently priced a 64% possibility of a rate hike at the Fed’s December meeting, according to federal funds futures tracked Fed Rate Monitor Tool.

The greenback was also increased  as the euro destabilized in the wake of Thursday’s European Central Bank policy meeting.

ECB President Mario Draghi signaled that the bank may extend its stimulus program in December.

On Friday, the euro dropped to seven month lows against the greenback, with EUR/USD  at 1.0882 in late trade.

USD/JPY dropped 0.15% to 103.77 late Friday, whereas GBP/USD declined 0.18% at 1.2231.

The approaching week, investors will be looking forward to Friday’s preliminary reading on U.S. 3rd quarter development, which is anticipated to show a important rally from the slow 2nd quarter.

The U.K. is also schedule to release its preliminary estimate of 3rd quarter development, scheduled on Tuesday, the first such look at how the economy is preforming since the June 23 Brexit vote.

“Preliminary data on business activity in October for key euro zone members as well as for the wider euro area is due out Monday.”

On Additional News

On October 24, Key euro zone members and the wider euro area are scheduled  to release flash PMIs for October.

In the U.S., New York Fed head William Dudley and St. Louis Fed chief James Bullard are to speak.

On October 25, Tuesday, In the euro zone, the Ifo Institute is to report on German business climate.

The U.S. is to announce private sector data on consumer confidence.

BoE Governor Mark Carney is scheduled to testify about the economic consequences of the Brexit vote in London. ECB President Mario Draghi is to speak at an event in Berlin.

On  October 26, Australia is to issue data on inflation during the 3rd quarter. The U.S. is to report on new home sales.

New Zealand is to release data on the trade balance on October 27. The U.K. is to post preliminary data on 3rd quarter economic development.

The U.S. is to produce reports on durable goods, initial jobless claims and pending home sales.

Friday, October 28

Japan is to issue data on inflation and household spending.

In the euro zone, Germany is to post preliminary inflation figures for October.

The U.S. is to complete the week with preliminary figures on 3rd quarter GDP and a revised consumer sentiment reading from the University of Michigan.

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