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Forex - Weekly outlook: June 19 - 23

ForexJun 18, 2017 12:23
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© Reuters. Dollar slips amid doubts over Fed rate hike outlook

Investing.com - The dollar slipped against a basket of the other major currencies on Friday, after weak U.S. housing and consumer sentiment data backed bets of a slower pace of interest rate hikes from the Federal Reserve.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, declined 0.3% to end at 97.14 by late Friday. The index ended the week with a loss of roughly 0.1%.

U.S. homebuilding fell for a third straight month in May to the lowest level in eight months, suggesting that subdued housing activity could dent economic growth in the second quarter.

In a separate report the University of Michigan said its consumer sentiment gauged fell to 94.5 in early June from 91.1 in May. Analysts had expected a reading of 97.1.

The subdued economic reports weighed on the dollar as it dropped to session lows against its peers.

The greenback rose to a more than two-week highs on Thursday after the Fed raised interest rates as widely expected and maintained plans to go ahead with another rate hike by year-end. The central bank also provided greater detail about how it plans to reduce its massive $4.5 trillion balance sheet.

Despite the Fed's relatively hawkish message, market players remained doubtful over the Fed's ability to raise rates as much as it would like before the end of the year due to a recent run of disappointing U.S. economic data.

Futures traders are pricing in less than a 15% chance of a hike at the Fed's September meeting, according to Investing.com’s Fed Rate Monitor Tool. Odds of a December increase was seen at about 35%.

Elsewhere, the yen ended Friday's session little changed in choppy, volatile trading after the Bank of Japan kept interest rates unchanged and hinted that its ultra-loose monetary policy could remain in place for a while.

Meanwhile, the British pound inched higher, underpinned by expectations that the Bank of England could alter its stance on low interest rates in the near future, after an increasing number of its members voted in favor of a rate hike on Thursday.

The euro also rose on Friday, drawing support after the International Monetary Fund and the euro zone's 19 finance ministers backed a payout of €8.5 billion to Greece in order to a default in July and avert another debt crisis.

In the week ahead, market players will focus on a handful of Federal Reserve speakers as they look for more clues on future monetary policy moves.

Traders will also keep an eye out on U.S. housing data to gauge if a recent downtick in consumer spending and inflation is translating into lower home prices and slack in sales.

In Europe, market players eagerly await the start of Brexit negotiations between Britain and the European Union.

Investors will also focus on flash survey data on euro zone business activity for fresh clues on the health of the region’s manufacturing and services sector.

Elsewhere, traders will pay close attention to retail sales and inflation data from Canada as they look for more clues on the health of the economy and the timing of a rise in borrowing costs.

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

Monday, June 19

Japan is slated to release a report on its trade balance.

Reserve Bank of Australia Governor Philip Lowe is due to participate in a panel discussion at the Crawford Australian Leadership Forum, in Canberra.

Britain's Brexit minister David Davis and the European Union's chief negotiator Michel Barnier are due to start negotiations over Britain's departure from the bloc in Brussels.

New York Fed President William Dudley and Chicago Fed President Charles Evans are due to make public appearances.

Tuesday, June 20

The Reserve Bank of Australia is scheduled to publish minutes of its latest policy meeting.

Swiss National Bank Chair Thomas Jordan is due to participate in a panel discussion, in Bern.

Bank of England Governor Mark Carney is due to speak at the Mansion House dinner, in London.

Fed Vice Chair Stanley Fischer, Boston Fed President Eric Rosengren and Dallas Fed President Rob Kaplan are scheduled to deliver comments.

Wednesday, June 21

The U.K. will publish public borrowing numbers.

The U.S. is to release industry data on existing home sales.

Thursday, June 22

The Reserve Bank of New Zealand will publish its latest rate decision.

The U.S. is to produce weekly data on initial jobless claims.

Canada is slated to release a report on retail sales.

Friday, June 23

The euro zone is to publish preliminary data on manufacturing and service sector activity. Ahead of the euro zone surveys, France and Germany will release their own PMI reports.

Canada is to produce data on consumer price inflation.

The U.S. is to round up the week with official data on new home sales.

St. Louis Fed President James Bullard, Cleveland Fed President Loretta Mester and Fed Governor Powell make public remarks.

Forex - Weekly outlook: June 19 - 23
 

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