Investors are bracing for a highly active week in the financial markets, with a deluge of economic data and a pair of monetary policy statements scheduled to make headlines. The Monday session features a lighter schedule, but one that could still impact the currency markets ahead of more compelling releases later in the week.
Action begins at 08:00 GMT when the Italian government reports on the July trade balance. The headline numbers include global trade flows as well as EU-specific balances.
One hour later, the European Commission’s statistical agency will release the final August consumer price index (CPI). Annual inflation is forecast to come in at 1.5%. So-called core inflation, which strips away volatile food and energy products, is expected to reach 1.2% year-over-year.
The German Buba Monthly Report is tentatively scheduled for Monday, although no timeframe has been provided. The monthly release contains relevant articles, speeches and analyses of current economic conditions from the perspective of the Deutsche Bundesbank.
Shifting gears to North America, the Canadian government will report on foreign portfolio investment at 12:30 GMT. Ninety minutes later, the US National Association of Home Builders (NAHB) will unveil its September Housing Market Index. The NAHB indicator provides an important snapshot of the housing market from the perspective of national homebuilders.
After a solid start to the week, the US dollar index (DXY) declined sharply on Thursday and Friday. The DXY basket held steady during Asian trade, and was last seen hovering at 91.89.
In commodities, gold and silver prices drifted slightly lower following last week’s broad downward correction.
EUR/USD
The euro regained its footing on Friday to settle at 1.1950 US. The EUR/USD exchange rate had suffered a sharp retreat earlier in the week back below 1.1900. The pair was last seen trading at 1.1949. The euro’s outlook remains favourable, as the combination of strong economic data and a dovish dollar continues to drive the common currency higher. The Federal Reserve policy decision on Wednesday could have a major impact on dollar pairs, including the euro.
USD/CAD
The USD/CAD kept a steady hand last week, as the pair hovered between 1.2100 and 1.2200. The pair was last seen trading at the upper end of that range, or roughly 20 pips below 1.2200. Immediate support is located in the mid-1.2100s and a loss of this region could spark a bigger pullback toward the 1.2075 level. On the upside, resistance has formed in the 1.2230 area.
GOLD
After a strong start to the month, gold prices have been in a downward consolidation for the past week. The loss in momentum was accompanied by the return of risk sentiment, as investors shrugged off the latest provocation from North Korea. Prices are hanging around $1,320.00. The US dollar is likely to provide fresh trading catalysts over the next five days.
