Weekly Outlook: Forex December 19 to 23


On Friday, the U.S. greenback inched lower against the other main currencies, but stayed near a 14 year peak as the first U.S. interest rate hike in a year and the possibility of  more aggressive Fed Reserve in 2017 continued to offer support.

The U.S. dollar index, that gauges the greenback’s strong point against a trade weighted basket of six major currencies, dropped 0.1% to 102.92 by late Friday, not far from Thursday’s high of 103.55, a level not perceived since December 2002.

For the week, the index increased 1.3%. The dollar climbed after the Fed hiked interest rates on Wednesday and indicated it expects to increase rates more rapidly than previously anticipated in 2017.

The U.S. central bank forecasted it would increase interest rates three times in 2017, surged from the two hikes forecasted in September.

Higher rates increase the greenback by making the currency more attractive to yield-seeking investors.

Compared to the yen, the dollar declined to 117.94 on Friday, dragging back from Thursday’s 11-month high of 118.65 as a bout of profit-taking kicked in. The pair increased 2.2% on the week.

Temporarily, the euro bounced off an overnight decline of 1.0365, the sluggish level since January 2003, to end at 1.0450 by late Friday. During week, the pair lost 1.1%.

In the week ahead, market participants will be observing the release of Thursday’s  final reading on U.S. 3rd quarter gross domestic product for fresh signs on the strong point of the economy and additional indications on the future path of monetary policy.

Temporarily, on Tuesday, market players will be awaiting a monetary policy announcement from the Bank of Japan, with most investors  anticipating  the bank to hold its negative interest rates and 10-year government bond yield object steady.

On Additional News

In  December 19, New Zealand is to produce statistics on private sector business confidence. In the euro zone, the Ifo Institute is to report on German business climate.

On December 20, the Reserve Bank of Australia is to post the minutes of its current monetary policy meeting, giving investors an understanding into how officials cite the economy and their policy options.

The BoJ is to broadcast its benchmark interest rate and post its rate statement, which outlines economic conditions and the factors influencing the monetary policy decision. The announcement is to be followed by a press conference. Canada is to post a report on wholesales.

On December 21,  New Zealand is to post data on the trade balance. The U.K. is to post statistic on public sector borrowing. The  U.S. is to publish statistic on existing home sales.

On December 22, New Zealand is to post statistic on 3rd  quarter development and recent account data.

The U.S. is to show data on 3rd quarter economic progress, initial jobless claims, durable goods orders and personal expenditure. Canada is to publish data on retail sales and inflation.

On  December 23, Financial markets in Japan will be closed for a national holiday. The U.K. is to report on the latest account and release revised data on 3rd quarter development.

Canada is to release data on economic development.The U.S. is to round up the week with figures on new home sales and consumer sentiment.

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