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Weekly outlook: July 17 - 21

7/17/2017, 10:00:59 AMMarket Analysis
Weekly outlook: July 17 - 21

The dollar fell to its lowest level since October against a basket of the other major currencies on Friday after weak U.S. inflation and retail sales data added to doubts over the Federal Reserve’s plans to raise interest rates again this year.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.69% to 94.9 late Friday, its lowest trough since October 5.

U.S. consumer price inflation slowed to 1.6% in June from 1.9% in May, the Labor Department said on Friday.

Consumer spending was also weaker than expected, with retail sales falling 0.2% in June, compared to expectations of a 0.1% rise.

The Fed hiked rates at its June meeting and stuck to its forecast for one more rate hike this year but the sluggish inflation outlook has raised questions over whether officials will be able to stick to their planned tightening path.

In testimony before Congress on Wednesday, Fed Chair Janet Yellen said the economy is on a strong enough footing for the Fed to raise rates and begin winding down its massive bond portfolio.

However she also reiterated that inflation is below target and noted that it is a particular “uncertainty” that could affect monetary policy.

The dollar was weaker against the yen, with USD/JPY down 0.65% at 112.53 late Friday, after falling to a two-week low of 112.28 earlier.

The euro gained ground, with EUR/USD advancing 0.62% to 1.1469, closing in on the 14-month high of 1.1488 set on Wednesday.

Sterling was also higher, with GBP/USD up 1.24% at 1.3099 after hitting 1.3114 earlier, its highest since September, 2016.

The Australian dollar surged to an almost 15-month high, with AUD/USD jumping 1.28% to 0.7829 in risk-on trade as global stock markets hit record highs.

The New Zealand dollar was also higher, with NZD/USD adding 0.33% to trade at 0.7346.

In the week ahead, investors will be turning their attention to the outcome of Thursday’s European Central Bank meeting for fresh clues on when the central bank will shift away from its ultra-easy policy.

Monday’s data on Chinese second quarter growth will also be closely watched along with inflation data out of the UK.

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

Monday, July 17

Financial markets in Japan will be closed for a holiday.

China is to release data on gross domestic product, industrial production and business investment.

The euro zone is to release revised data on consumer inflation.

Canada is to report on foreign securities purchases.

The U.S. is to release data on manufacturing activity in the New York region.

Tuesday, July 18

New Zealand is to release inflation data.

The Reserve Bank of Australia is to publish the minutes of its latest monetary policy meeting.

The UK is to release its latest inflation figures.

The ZEW Institute is to report on German economic sentiment.

The U.S. is to report on import prices.

Bank of England Governor Mark Carney is to speak at an event in Hampshire.

Wednesday, July 19

Canada is to release data on manufacturing sales.

The U.S. is to produce reports on building permits and housing starts.

Thursday, July 20

Australia is to release its latest employment report as well as private sector data on business confidence.

The Bank of Japan is to announce its benchmark interest rate and publish a rate statement which outlines economic conditions and the factors affecting the monetary policy decision. The announcement is to be followed by a press conference.

The UK is to report on retail sales.

The ECB is to announce its latest monetary policy decision and President Mario Drahi is to hold a press conference.

The U.S. is to publish data on initial jobless claims and manufacturing activity in the Philadelphia region.

Friday, July 21

The UK is to report on public sector net borrowing.

Canada is to round up the week with data on inflation and retail sales.