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Forex - Weekly outlook: January 19 - 23

Published 01/18/2015, 06:28 AM
Updated 01/18/2015, 12:28 PM
Swiss franc slips lower on Friday after shock SNB move roils markets

Swiss franc slips lower on Friday after shock SNB move roils markets

Investing.com - The euro and the dollar pushed higher against the Swiss franc on Friday, a day after an unexpected move by the Swiss National Bank to abandon its currency peg against the euro, while the dollar rose to fresh 12-year highs against the euro ahead of expected monetary easing by the European Central Bank as early as this week.

The euro posted its largest ever single-day decline against the Swiss franc on Thursday after the SNB surprised markets by scrapping the 1.20 per euro exchange rate floor it imposed in September 2011.

The central bank also cut interest rates deeper into negative territory, a move intended to dissuade investors from buying the franc.

SNB Chairman Thomas Jordan said Thursday the exchange rate cap had “protected the Swiss economy from serious harm” but added that maintaining the policy was not “sustainable or sensible in the long term.”

EUR/CHF was trading at 0.9930 late Friday, up 1.75% for the day after falling to all-time lows of 0.8696 on Thursday, and ended the week with losses of more than 17%.

USD/CHF was up 2.25% to 0.8586 late Friday, having recovered from the lows of 0.7360 struck in the previous session. The franc still ended the week with gains of 15% against the dollar.

The shock move indicated that the SNB sees a high likelihood that the ECB will implement quantitative easing measures at its upcoming meeting on Thursday.

An interim ruling last Wednesday, which is likely to be accepted by the European Court of Justice, said the ECB was free to pursue a bond purchasing program without legal challenge.

EUR/USD was down 0.55% at 1.1567 in late trade on Friday, after falling to lows of 1.1461 earlier in the day, the weakest since November 2003.

In other trading, USD/JPY added 1.15% to hit 117.46 late Friday, recovering from overnight lows of 115.84.

The diverging monetary policy stance between the Federal Reserve, which is poised to raise interest rates and central banks in Europe and Japan has seen the dollar strengthen broadly in recent months.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.57% to 93.05 and notched up its fifth successive week of gains, supported by weakness in the euro.

In the week ahead, investors will be focusing on Thursday’s outcome of the ECB’s policy meeting and the banks post policy meeting press conference will be closely watched.

Meanwhile, China is to release data on economic growth while the Bank of Japan and the Bank of Canada are also to hold monetary policy meetings.

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

Monday, January 19

Switzerland is to release data on producer price inflation.

In the euro zone, Germany’s Bundesbank is to publish its monthly report.

U.S. markets will remain closed for the Martin Luther King Day holiday.

Tuesday, January 20

China is to release data on gross domestic product, the broadest indicator of economic activity and the leading indicator of economic growth. The country is also to report on fixed asset investment, industrial production and retail sales.

The ZEW Institute is to release its closely watched report on German economic sentiment, a leading indicator of economic health.

Canada is to publish data on manufacturing sales.

Later in the day, New Zealand is to release data on consumer price inflation.

Wednesday, January 21

Australia is to release private sector data on consumer sentiment.

The Bank of Japan is to announce its benchmark interest rate and publish its rate statement, which outlines economic conditions and the factors affecting the monetary policy decision. The bank will hold a press conference following the announcement.

The U.K. is to release its monthly employment report, as well as data on average earnings. Also Wednesday, the Bank of England is to publish its monthly meeting minutes.

The U.S. is to release data on building permits and housing starts.

The Bank of Canada is to announce its benchmark interest rate and hold a press conference to discuss the monetary policy decision. Meanwhile, Canada is to report on wholesale sales.

Thursday, January 22

Spain is to release data on the unemployment rate.

The ECB is to announce its benchmark interest rate. The rate announcement will be followed by a post-policy meeting press conference with President Mario Draghi.

The U.S. is to release data on initial jobless claims.

Friday, January 23

China is to publish the preliminary reading of its HSBC manufacturing index.

The euro zone is to publish preliminary data on private sector activity, while Germany and France are to also to publish data on private sector growth.

The U.K. is to release data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity.

Later in the day, Canada is to produce data on retail sales and consumer inflation.

The U.S. is to round up the week with preliminary data on manufacturing activity and a private sector report on existing home sales.

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