What’s In the Offing for Dollar, Euro and Yen This Week?

With the dollar having touched 14-year peak multiple times since U.S. election, the euro coping with a shifting political landscape in the Eurozone and yen struggling because of economic slowdown in Japan, what should you expect in the forex market this week?

Several events this week are likely to impact the strength of the dollar and many of its trade partners. Here are some of the events you might want to track closely:

Monday, January 9: Speeches by U.S. Federal Reserve officials

Australia is set to report on building approvals and investors will be looking for clues of economic recovery in the country’s housing sector. An upbeat report would lift the Australian dollar but put pressure on the U.S. currency, but a downbeat report could help the dollar but hurt the Australian currency.

The U.K. is also set to release data on house price inflation, and signs of a recovering U.K. housing market could strengthen the pound, putting breaks on the dollar surge against the British currency.

In the U.S., the Atlanta Fed President, Dennis Lockhart, and the Boston Fed President, Eric Rosengren, are to speak and investors will be parsing their comments for clues for the pace of future Fed rate increases. The Fed raised interest rates in December and promised at least three more rate hikes this year subject to economic conditions in the U.S.

Expectations of rate increases tend to boost the dollar as increases the appeal of the currency among investors seeking U.S. yield-bearing investments.

Tuesday, January 10: China reports on inflation

China will report on the country’s producer and consumer prices and investors will be looking for signs of inflation for clues of economic growth. Improving prices are likely to lift the yuan and several Asian currencies given that Chinese producers acquire raw materials for China’s neighbors. As such, economic growth in China bodes well for Asian economies and the opposite is also true.

Besides China’s inflation report, Canada will also release data on building permits, offering a clue of the health of the country’s housing sector. An upbeat report is likely to lift the Canadian currency but hurt the greenback.

Wednesday, January 11: Trump’s first news conference as president-elect

President-elect Donald Trump has been a major factor in dollar’s recent rally to multiyear peaks, and the fate of the U.S. currency heavily depends on what Trump does or fails to do concerning is campaign proposals. Trump is due to speak at his first news conference since he won the November election and investors will be looking for hints that the president-elect is determined to follow through with his economic stimulus proposals such as increasing government spending on infrastructure projects. Hawkish comments from the president-elect should offer fresh support for the dollar but put pressure on greenback rivals such as euro, yen and yuan.

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The dollar has gained ground against major trade partners amid expectations that Trump will spur economic growth  in the U.S. by increasing government spending on infrastructure and allowing U.S. companies to repatriate their cash at a lower tax burden.

Source: Tradingview.

The U.K. is also set to release its manufacturing, industrial production and trade data.  An upbeat report is likely to support the pound and euro while putting pressure on the dollar.

Thursday, January 12: U.S. weekly jobless claims

The U.S. is set to release data on import prices and weekly jobless claims. A decline in jobless claims would signal that the economic is continuing to improve, which in turn would support the dollar as that would increase the possibility that the Fed will hike interest rates more frequently in 2017.

The Fed Chair Janet Yellen and several Fed officials are to speak on Thursday and investors will be listening keenly for hints on the future rates increases.

Investors will also be keeping a close eye on Canada’s housing price report and scrutinizing minutes of the last monetary meeting of the European central bank. The quality of Canada’s housing prices will affect the country’s currency and its trade partners, while hawkish sentiment in the European central bank minutes could lift the euro, which has recently been subdued by a surging dollar.

Friday, January 13: U.S. consumer sentiment report

The U.S. will release data on retail and producer prices as well as gauge on consumer sentiment. Upbeat data would offer fresh support for a dollar rally but downbeat data could reverse some of the dollar’s recent gains.

China will also report on its trade balance on Friday, with an upbeat report likely to strengthen the yuan and a downbeat report likely to weaken the Chinese currency.

The dollar gained Friday after the Labor Department reported that hourly wages increased about 3% in December, the fastest annual wage growth since 2009.

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