Forex - Weekly outlook: 10.09 - 10.13
The dollar turned lower against a basket of the other major currencies on Friday amid fresh worries over tensions with North Korea, giving up earlier gains made after the U.S. jobs report for September showed higher than expected wage growth.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.16% at 93.62 late Friday, after hitting a more than two-month high of 94.10 earlier in the session.
The dollar fell following reports on Friday that North Korea is preparing to test a long-range missile, adding to fears over a potential conflict in the region.
The dollar earlier rose as the wage data from the U.S. jobs report for September was seen as potentially boosting inflation.
The U.S. economy lost 33,000 jobs in September, the Labor Department reported, ending seven straight years of job growth. But the decline was driven by slower hiring due to the effects of Hurricanes Irma and Harvey.
The unemployment rate fell to 4.2%, the lowest since 2001 and average hourly earnings rose 2.9% from a year earlier.
The uptick in wage inflation bolstered expectations that the Federal Reserve will hike interest rates in December.
Expectations that U.S. rates will rise help support the dollar by making U.S. assets more attractive to yield-seeking investors.
USD/JPY initially rose as high as 113.44 before pulling back to 112.62 in late trade, down 0.17% for the day.
EUR/USD touched a low of 1.1670, the weakest level since August 17 before rising back to 1.1732 at the close.
Meanwhile, the pound fell to its lowest level in four weeks on Friday as concerns over divisions in the government over Brexit weighed.
GBP/USD was down 0.4% at 1.3065 late Friday and ended the week down 2.47%, the largest weekly decline in more than a year.
In the week ahead, investors will be looking to Wednesday’s Fed minutes for fresh indications on the timing of the next U.S. rate hike. Friday’s U.S. data on inflation and retail sales will also be in focus.
Markets will also be eyeing a speech by ECB head Mario Draghi for fresh clues on when the central bank will shift away from its ultra-easy policy.
Monday, October 9
Financial markets in Japan will be closed for a holiday.
China is to publish its Caixin services PMI.
Germany is to release data on industrial production.
In Canada, markets are to remain closed for the Thanksgiving Holiday.
Tuesday, October 10
Australia is to release data on business confidence.
The UK is to publish reports on manufacturing production and the trade balance.
Canada is to report on building permits.
Minneapolis Fed President Neel Kashkari is to speak.
Wednesday, October 11
Dallas Fed President Robert Kaplan is to speak.
Later in the day, the Fed is to publish the minutes of its latest policy meeting.
Thursday, October 12
Canada is to report on new house price inflation.
The U.S. is to release data on producer price inflation and jobless claims.
ECB President Mario Draghi is due to speak at an event in Washington. Fed Governors Jerome Powell and Lael Brainard are also to deliver remarks at the same event.
Friday, October 13
New Zealand is to publish a manufacturing index.
The Reserve Bank of Australia is to publish its financial stability review.
China is to release trade data.
The U.S. is to round up the week with reports on inflation and retail sales, as well as preliminary data on consumer sentiment.