Forex – Weekly outlook: September 19-23

Forexpros – Last Friday saw the euro fall against the U.S. dollar, paring the week's gains after a meeting of European Union finance ministers failed to make any substantial progress on dealing with the escalating debt crisis in the single currency bloc.

EU ministers failed to reach an agreement over a controversial demand by Finland that Greece provide collateral in exchange for further bailout funds.

The meeting was also attended by U.S. Treasury Secretary Timothy Geithner, who urged euro zone leaders to overcome damaging divisions and remove “catastrophic risk” from markets.

Also Friday, ratings agency Moody's said it would extend its three-month review of Italy's sovereign debt rating because of “the increasingly challenging economic and financial environment and fluid political developments” in the euro zone.

The euro strengthened broadly on Thursday, after the European Central Bank announced that it would provide additional dollar liquidity to euro area banks in a move coordinated with the Federal Reserve and other central banks.

The move eased concerns over funding shortages among European lenders, who have had difficulty borrowing dollars due to the region's debt crisis and as a result have had to depend more heavily on the ECB for loans.

The single currency was supported earlier in the week after French President Nicolas Sarkozy and German Chancellor Angela Merkel said Greece should remain in the euro zone and after Athens reaffirmed commitment to its budget plan.

Elsewhere, the pound slumped to an eight-month low against the dollar last week, as a recent slew of soft economic data sparked speculation that the Bank of England may introduce fresh monetary stimulus to shore up growth in the fragile economy.

Also last week, the Swiss National Bank left its interest rate close to zero in a widely expected decision and reaffirmed its to defend the minimum exchange rate of 1.20 per euro” with utmost determination.”

Meanwhile, the yen remained within striking distance of its record high against the dollar, amid increased safe haven demand in the wake of the SNB's action to weaken the franc. Japanese Prime Minister Yoshihiko Noda reiterated that Japan was ready to take steps to curb the appreciation of the yen when necessary.

In the coming week, developments in the euro zone look set to remain in focus, while investors will be watching the outcome of the Federal Reserve's extended policy setting meeting on Wednesday for any signs that the bank is looking at providing fresh monetary stimulus to support the economy.

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

Monday, September 19

New Zealand is to publish a report on consumer sentiment, which is closely correlated to consumer spending. In Japan, markets will remain closed for a national holiday.

Elsewhere, the U.K. is to publish industry data on house price inflation, an important indicator of economic strength. Later in the day, the Bank of England is to release its quarterly bulletin.

Tuesday, September 20

The Reserve Bank of Australia is to publish the minutes of its most recent monetary policy meeting. The minutes give investors an insight in to current economic conditions from the bank's point of view.

Switzerland's State Secretariat for Economic Affairs is to publish economic forecasts, while the country is also to publish official data on the trade balance, the difference in value between imports and exports over the month.

In the euro zone, Germany is to publish government data on producer price inflation, while the ZEW Centre for Economic Research is to release reports on economic sentiment in Germany and also in the wider single currency bloc.

Later in the day, Canada is to publish an index of leading economic indicators, designed to forecast the future direction of the economy, as well as government data on wholesale sales. In addition, the Governor of the Bank of Canada, Mark Carney is to speak.

Also Tuesday, the U.S. is to publish government data on building permits, an excellent gauge of future construction activity, as well as a report on housing starts, a leading indicator of economic health.

Wednesday, September 21

New Zealand is to publish data on the country's current account, as well as reports on credit card spending and visitor arrivals, while Australia is to publish an index of leading economic indicators, designed to forecast the future direction of the economy. Elsewhere, Japan is to produce government data on the trade balance.

In the U.K., the Bank of England is to publish the minutes of the most recent policy setting meeting. The minutes give investors an insight in to current economic conditions from the bank's point of view. The bank is also to release data on public sector borrowing, a leading indicator of economic health.

Canada is to produce government data on consumer price inflation, which accounts for a majority of overall inflation.

Later Wednesday, the U.S. is to publish industry data on existing home sales as well as a government report on crude oil inventories. In addition, the Federal Reserve is to announce the federal funds rate. The bank's rate statement will be closely watched by investors for any clues to the future direction of monetary policy.

Thursday, September 22

New Zealand is to publish official data on second quarter gross domestic product, the broadest measure of economic activity and the primary gauge of the economy's health.

The euro zone is to publish preliminary data on activity in the manufacturing and service sectors, while France and Germany are also to release individual reports. The single currency bloc is also to publish official data on industrial new orders, a leading indicator of production.

Elsewhere, the ZEW Centre for Economic Research is to release a report on Swiss economic sentiment, while the U.K. is to release data on industrial order expectations, an important indicator of economic strength.

Later in the day, Canada is to produce government data on retail sales, the primary gauge of consumer spending, which accounts for the majority of overall economic activity.

In addition, the U.S. is to publish its weekly report in initial jobless claims.

Friday, September 23

Australia is to publish an index of leading economic indicators, while the RBA is to release its financial stability review. Meanwhile, markets in Japan are to remain closed for a national holiday.

The U.K. is to publish industry data on mortgage approvals, an important indicator of demand in the housing market.

Also Friday, ECB President Jean-Claude Trichet is to deliver a speech in Washington; his comments will be closely watched for clues to the future possible direction of monetary policy.

Forexpros