Investing.com - The U.S. dollar pulled back from a nine-month high against the yen and the euro rose to its highest level against the dollar since May on Friday after weak U.S. inflation data warranted continued monetary easing by the Federal Reserve.
Official data showed that U.S. consumer inflation fell 0.3% in November, down for the first time in six months on the back of lower gasoline prices, bringing the annualized rate of inflation to 1.8%.
The Federal Reserve said Wednesday that interest rates would remain close to zero as long as inflation forecasts remain near the bank’s 2% target and until the U.S. unemployment rate declines to 6.5% or less.
The U.S. central bank also said it would continue to purchase USD85 billion a month of government bonds and mortgage based securities in order to shore up the economic recovery.
Investor focus shifted back to negotiations to avoid the U.S. fiscal cliff following the central bank announcement, amid concerns that the automatic tax hikes and spending cuts due to take effect on January 1st could derail the U.S. recovery.
The euro continued to be supported by optimism over signs of headway in dealing with the debt crisis in the region after finance ministers agreed a deal on rules for supervising banks.
Ministers also released EUR49.1 billion of financial aid for Greece, after the country completed a scheme to buy back its debt from private investors last week.
The yen came off its lowest level against the dollar since March on Friday amid profit taking ahead of Japanese general elections on Sunday, which are expected to result in growing political pressure on the Bank of Japan to implement more aggressive easing measures.
Japanese opposition leader Shinzo Abe, who is widely expected to become the new prime minister, has called for more easing by the BoJ in order to spur growth.
Elsewhere, the pound hit a two-month high against the broadly weaker dollar on Friday, but slid to an almost two-week low against the euro after ratings agency Standard & Poor's put the U.K.'s triple-A rating on negative outlook, and warned that it saw a one-in-three chance for a downgrade in the next two years.
In the week ahead, investors will be continuing to monitor the progress of talks in Washington on the fiscal cliff. Market participants will also be awaiting election results in Japan as well as the outcome of Thursday’s BoJ policy setting meeting.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, December 17
New Zealand is to release data on consumer sentiment, a leading indicator of consumer spending.
The U.K. is to release industry data on house price inflation, an important indicator of demand in the housing sector.
Later Monday, Canada is to publish a government report on foreign investment in Canadian securities, which is directly linked to currency demand.
The U.S. is to publish official data on manufacturing activity in New York State, a leading indicator of economic health, as well as a report on the balance of domestic and foreign investment in U.S. securities.
Tuesday, December 18
The Reserve Bank of Australia is to publish the minutes of its most recent policy meeting, which contain important insights into current and future economic conditions from the bank’s perspective.
New Zealand is to release a report on business confidence, a leading indicator of economic health. The country is also to produce data on the current account.
The U.K. is to release official data on consumer price inflation, which accounts for a majority of overall inflation.
The U.S. is to produce government data on the current account.
Wednesday, December 19
Japan is to release official data on the trade balance, the difference in value between imports and exports.
The euro zone is to produce official data on the current account, while the Ifo Institute is to release a report on German business climate.
The Bank of England is to publish the minutes of its most recent policy meeting, which contain important insights into current and future economic conditions from the bank’s perspective. The U.K. is also to release industry data on retail sales.
Canada is to produce official data on wholesale sales, a leading indicator of consumer spending.
The U.S. is to publish government data on building permits, an excellent gauge of future construction activity, as well as data on housing starts.
The country is also to release official data on crude oil stockpiles.
Later Wednesday, New Zealand is to release official data on third quarter gross domestic product, the broadest indicator of economic activity and the leading measure of the economy's health.
Thursday, December 20
The BoJ is to announce its benchmark interest rate. The rate announcement is to be accompanied by the bank’s rate statement, which contains important insights into current and future economic conditions from the bank’s perspective and will be followed by a press conference.
Switzerland is to release official data on the trade balance, the difference in value between imports and exports.
The U.K. is to produce official data on retail sales, the leading indicator of consumer spending, which accounts for the majority of overall economic activity.
In the euro zone, Germany is to release official data on producer price inflation.
Later in the day, Canada is to publish government data on retail sales.
The U.S. is to release the weekly report on initial jobless claims, as well as revised data on third quarter growth and a report on manufacturing activity in Philadelphia. In addition, the U.S. is to publish industry data on existing home sales, a leading indicator of economic health.
Friday, December 21
The euro zone is to release a report on German consumer climate, a leading indicator of consumer spending.
The U.K. is to produce government data on the current accounts and on public sector net borrowing, in addition to revised data on third quarter growth.
Canada is to release official data on consumer price inflation, which accounts for a majority of overall inflation, as well as monthly data on economic growth.
The U.S. is to round up the week with revised data on consumer sentiment from the University of Michigan, as well as government data on personal income and spending.
Official data showed that U.S. consumer inflation fell 0.3% in November, down for the first time in six months on the back of lower gasoline prices, bringing the annualized rate of inflation to 1.8%.
The Federal Reserve said Wednesday that interest rates would remain close to zero as long as inflation forecasts remain near the bank’s 2% target and until the U.S. unemployment rate declines to 6.5% or less.
The U.S. central bank also said it would continue to purchase USD85 billion a month of government bonds and mortgage based securities in order to shore up the economic recovery.
Investor focus shifted back to negotiations to avoid the U.S. fiscal cliff following the central bank announcement, amid concerns that the automatic tax hikes and spending cuts due to take effect on January 1st could derail the U.S. recovery.
The euro continued to be supported by optimism over signs of headway in dealing with the debt crisis in the region after finance ministers agreed a deal on rules for supervising banks.
Ministers also released EUR49.1 billion of financial aid for Greece, after the country completed a scheme to buy back its debt from private investors last week.
The yen came off its lowest level against the dollar since March on Friday amid profit taking ahead of Japanese general elections on Sunday, which are expected to result in growing political pressure on the Bank of Japan to implement more aggressive easing measures.
Japanese opposition leader Shinzo Abe, who is widely expected to become the new prime minister, has called for more easing by the BoJ in order to spur growth.
Elsewhere, the pound hit a two-month high against the broadly weaker dollar on Friday, but slid to an almost two-week low against the euro after ratings agency Standard & Poor's put the U.K.'s triple-A rating on negative outlook, and warned that it saw a one-in-three chance for a downgrade in the next two years.
In the week ahead, investors will be continuing to monitor the progress of talks in Washington on the fiscal cliff. Market participants will also be awaiting election results in Japan as well as the outcome of Thursday’s BoJ policy setting meeting.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, December 17
New Zealand is to release data on consumer sentiment, a leading indicator of consumer spending.
The U.K. is to release industry data on house price inflation, an important indicator of demand in the housing sector.
Later Monday, Canada is to publish a government report on foreign investment in Canadian securities, which is directly linked to currency demand.
The U.S. is to publish official data on manufacturing activity in New York State, a leading indicator of economic health, as well as a report on the balance of domestic and foreign investment in U.S. securities.
Tuesday, December 18
The Reserve Bank of Australia is to publish the minutes of its most recent policy meeting, which contain important insights into current and future economic conditions from the bank’s perspective.
New Zealand is to release a report on business confidence, a leading indicator of economic health. The country is also to produce data on the current account.
The U.K. is to release official data on consumer price inflation, which accounts for a majority of overall inflation.
The U.S. is to produce government data on the current account.
Wednesday, December 19
Japan is to release official data on the trade balance, the difference in value between imports and exports.
The euro zone is to produce official data on the current account, while the Ifo Institute is to release a report on German business climate.
The Bank of England is to publish the minutes of its most recent policy meeting, which contain important insights into current and future economic conditions from the bank’s perspective. The U.K. is also to release industry data on retail sales.
Canada is to produce official data on wholesale sales, a leading indicator of consumer spending.
The U.S. is to publish government data on building permits, an excellent gauge of future construction activity, as well as data on housing starts.
The country is also to release official data on crude oil stockpiles.
Later Wednesday, New Zealand is to release official data on third quarter gross domestic product, the broadest indicator of economic activity and the leading measure of the economy's health.
Thursday, December 20
The BoJ is to announce its benchmark interest rate. The rate announcement is to be accompanied by the bank’s rate statement, which contains important insights into current and future economic conditions from the bank’s perspective and will be followed by a press conference.
Switzerland is to release official data on the trade balance, the difference in value between imports and exports.
The U.K. is to produce official data on retail sales, the leading indicator of consumer spending, which accounts for the majority of overall economic activity.
In the euro zone, Germany is to release official data on producer price inflation.
Later in the day, Canada is to publish government data on retail sales.
The U.S. is to release the weekly report on initial jobless claims, as well as revised data on third quarter growth and a report on manufacturing activity in Philadelphia. In addition, the U.S. is to publish industry data on existing home sales, a leading indicator of economic health.
Friday, December 21
The euro zone is to release a report on German consumer climate, a leading indicator of consumer spending.
The U.K. is to produce government data on the current accounts and on public sector net borrowing, in addition to revised data on third quarter growth.
Canada is to release official data on consumer price inflation, which accounts for a majority of overall inflation, as well as monthly data on economic growth.
The U.S. is to round up the week with revised data on consumer sentiment from the University of Michigan, as well as government data on personal income and spending.