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Forex - Weekly outlook: December 12 - 16

Published 11/12/2016, 11:11 pm
Updated 11/12/2016, 11:21 pm
© Reuters.  Dollar rises amid widespread expectations for Federal Reserve rate hike
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Investing.com - The dollar rose against the other major currencies on Friday amid widespread expectations that the Federal Reserve will hike interest rates at the conclusion of its policy meeting this week.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.48% to 101.60 late Friday. For the week, the index was up 0.75%.

Little doubt now remains that the Fed will hike rates for the first time in a year on Wednesday, with investors pricing in a 100% chance of an increase, according to federal funds futures tracked Investing.com's Fed Rate Monitor Tool.

Higher rates boost the dollar by making the currency more attractive to yield-seeking investors.

The dollar surged against the yen, with USD/JPY up 1.18% to 115.36 late Friday, the strongest level since February 9.

Meanwhile, the euro was lower for a second day after the European Central Bank said Thursday it would extend its bond-buying stimulus program for an additional nine months, even as it cut back on the size of asset purchases.

EUR/USD was down 0.57% at 1.0555 late Friday.

The ECB said it will maintain the size of its monthly quantitative easing program at €80 billion until its scheduled end in March 2017, and will reduce it to €60 billion as of April.

The asset purchases will continue at a pace of €60 billion per month until the end of December 2017, or beyond, if necessary, the ECB said.

Sterling pushed higher against the weaker euro on Friday, with EUR/GBP down 0.47% to 0.8400.

But the pound posed its first week of losses in four against the dollar as hopes for a delayed British exit from the European Union dimmed after lawmakers said they would stick to Prime Minister Theresa May's Brexit timetable.

GBP/USD was at 1.2589 late Friday and ended the week down 0.62%.

Elsewhere, the U.S. dollar touched seven-week lows against the Canadian dollar on Friday as higher oil prices bolstered the commodity linked Canadian currency.

USD/CAD fell to lows of 1.3153, the weakest level since October 20 and was last at 1.3188.

In the week ahead, investors will be looking for possible signals from the Fed on the pace of rate hikes next year, with little doubt remaining that its will raise rates at the conclusion of its meeting on Wednesday.

Market watchers will be awaiting a number of U.S. economic reports, including figures on retail sales and inflation for fresh signs on how the economy is performing in the final quarter.

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

Monday, December 12

Japan is to publish data on core machinery orders and producer prices.

The U.K. is to release industry data on house prices.

Tuesday, December 13

China is to produce data on industrial production and fixed asset investment.

The U.K. is to report on consumer price inflation.

The ZEW Institute is to report on German economic sentiment.

Wednesday, December 14

Japan is to publish the Tankan manufacturing and non-manufacturing indexes.

The U.K. is to publish its closely watched monthly jobs report.

The U.S. is to release data on retail sales, industrial production and producer prices.

The Fed is to announce its benchmark interest rate and publish updated economic projections. Fed Chair Janet Yellen will hold a press conference to outline economic conditions and the factors affecting the monetary policy decision.

Thursday, December 15

Australia is to publish its monthly jobs report.

The euro zone is to publish preliminary estimates on private sector business activity.

The Swiss National Bank is to announce its latest monetary policy decision and hold a press conference to discuss the economic outlook.

The U.K. is to release data on retail sales and the Bank of England is to announce its latest monetary policy decision.

Canada is to release data on manufacturing sales.

The U.S. is to release a raft of data, including reports on consumer prices, jobless claims and manufacturing activity in both the Philadelphia and New York regions.

Friday, December 16

The euro zone is to release revised data on inflation.

The U.S. is to round up the week with reports on building permits and housing starts.

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