The US Dollar Ended the Week with Growth (Weekly Review)

Last week was full of important events, which caused some splash of volatility in the currency market. These events, of course, should include a number of global central banks decisions regarding interest rates, as well as the publication of data of the US labor market. The results of meetings of the Reserve Bank of Australia, Bank of Canada and the Bank of England as a whole were as expected. All they have left interest rates unchanged, so the market reaction was rather modest. Besides, the Bank of England also left the volumes of the asset purchase program unchanged that does not contribute to increasing of the attractiveness of the British pound against the US dollar.

The European Central Bank, as it was expected, retained the same level of interest rates. Low inflation in the Eurozone, sluggish economic growth, as well as the President's of the Bank Mario Draghi comments, created the conditions for speculations on the topic about the start of the quantitative easing program at this meeting, but there was an unpleasant surprise for everyone who relied on it - the Central Bank refrained from taking actions. It was stated that the need for additional stimulus measures will be considered at the beginning of the next year. As a result, bears decided to take profits regarding the euro on short positions, that led to the strengthening of the EURUSD.

However, the pair failed to continue the upward correction, because the report regarding the employment in the US non-farm payrolls was much more stronger than it was expected by market participants. Instead of the expected 230 thousand the economy added 321 thousand jobs, that led to the growth of the dollar against most of its competitors. Amid this, the EURUSD fell to 1.2271, the GBPUSD rose to 1.5568, and the USDJPY, having broken the important level of 120.00, rose to 121.68. It is obvious that buying of the dollar remains an effective trading strategy. For IAFT traders this week will be quiet because it is not full of important events for the major currency pairs, therefore, in the absence of new stimulus, the growth of the dollar may be suspended.

Planned for the week:

Monday, 8th December
09:30 GMT – Eurozone. Sentix Investor Confidence;
13:15 GMT – Canada. Housing Starts (m/m, y/y);
15:00 GMT – USA. Labor market conditions index (LMCI).

Tuesday, 9th December
Eurozone. The Economic and Financial Affairs Council (ECOFIN) Meetings;
07:00 GMT – Germany.  Trade Balance;
09:30 GMT – Great Britain. Industrial Production;
15:00 GMT – Great Britain. NIESR GDP Estimate;
15:00 GMT – USA. Wholesale Inventories;

Wednesday, 10th December
00:30 GMT – Australia. Owner Occupied Home Loans Values;
00:30 GMT – Australia. Home Loans;
01:30 GMT – China. Consumer Price Index (m/m, y/y);
01:30 GMT – China. Producer Price Index (y/y);
02:00 GMT – New Zealand. House price index REINZ (m/m);
05:00 GMT - Japan. Consumer Confidence;
09:30 GMT – Great Britain. Visible Trade Balance;
09:30 GMT – Great Britain. Total Trade Balance;
09:30 GMT – Great Britain. Trade Balance Non EU;
12:00 GMT – USA. MBA Mortgage Applications;
20:00 GMT – New Zealand. Official Cash Rate;
20:00 GMT – New Zealand. RBNZ Rate Statement;
20:00 GMT – New Zealand. RBNZ Press Conference;
23:50 GMT – Japan. Tertiary Industry Activity (m/m);
23:50 GMT – Japan. Core Machinery Orders (m/m, y/y);

Thursday, 11th December
00:01 GMT – China. New Loans;
00:30 GMT – Australia. Unemployment Rate;
00:30 GMT – Australia. Employment Change;
07:00 GMT – Germany. Final Consumer Price Index - EU Harmonised (m/m, y/y);
07:00 GMT – Germany. Final Consumer Price Index (m/m, y/y);
08:30 GMT – Switzerland. SNB Press Conference;
08:30 GMT – Switzerland. Libor Rate;
08:30 GMT – Eurozone. ECB Calls for Bids in 4-years TLTROs;
09:00 GMT – Eurozone. ECB Monthly Bulletin;
13:30 GMT – USA. Retail Sales (m/m);
13:30 GMT – USA. Core Retail Sales (m/m);
13:30 GMT – USA. Unemployment Claims;
15:00 GMT – USA. Business Inventories;
21:30 GMT – New Zealand. Business NZ Manufacturing Index.

Friday, 12th December
04:30 GMT – Japan. Revised Industrial Production (m/m, y/y);
05:30 GMT – China. Industrial Production (y/y);
05:30 GMT – China. Retail Sales (y/y);
10:00 GMT – Eurozone. Industrial Production (m/m, y/y);
10:00 GMT – Eurozone. Employment Change (q/q, y/y);
13:30 GMT – USA. Producer Price Index (m/m, y/y);
14:55 GMT – USA. Prelim UoM Consumer Sentiment.

This week traders should pay attention to the release of such statistics as: industrial production in the UK, consumer price inflation in China and Germany, the SNB and the RBNZ decisions regarding interest rates.

Author: Anthony Porter, IAFT Analyst