Forex Weekly Outlook October 21-25

The US dollar suffered badly from the last minute and short term deal to avert the debt ceiling and to end the government shutdown. Outstanding data is now beginning to come out. Non – farm Payrolls,on Tuesday, housing data as well as German Ifo Business Climate and GDP figures in the UK. These are the main market-movers on our calendar. Here is the weekly outlook.

The US was on close call from hitting debt ceiling on October 17th, when a deal was struck, barely an hour before the deadline expired.US President Barrack Obama, that signed the legislation passed in both houses of Congress. Democrats and Republicans agreed to extend the debt ceiling to February 7th with an option to use “special measures” to avoid a default until March. The 16 days of shutdown caused a lot of damage to the US economy both financially and morally. The uncertainty will likely push back QE tapering and has already put the USD in a world of pain. There may be downside risks in the coming months, especially towards the new ultimatum scheduled in early 2014.

1. US Existing Home Sales: Monday, 14:00. U.S. home sales edged up to an annual rate of 5.48 million in August, a 6-1/2 year high following a 5.39 million in July. The surge in sales was driven by cheap borrowing costs amid rising mortgage rates, indicating the housing sector continues to strengthen. Analysts expected a smaller figure of 5.27 million. A lower rate of  5.31  million units is expected.
2. US Non-Farm Payrolls and Unemployment rate: Tuesday, 12:30. The US economy added 169,000 jobs in August, missing predictions for a larger gain of 178,000 and following a 104,000 increase in the previous month. The unemployment rate declined to 7.3% for the wrong reasons, due to lower participation rate. The number of people unemployed in August declined to 11.3 million. But about four in 10 were ranked long-term unemployed – people officially seeking jobs who had been jobless for at least 27 weeks. The US job market is expected to grow by 179,000 positions, while the unemployment rate is predicted to remain unchanged at 7.3% US economy is expected to add 179,000 jobs and unemployment rate is expected to remain at 7.3%.
3. Canadian rate decision: Wednesday, 14:00.  A slowdown in global economic growth has delayed the anticipated rise in Canadian exports and investment. Even the relatively stronger housing sector has cooled down in recent months. These factors compelled the Bank of Canada to maintain the target for the overnight rate at 1.0%.  Monetary policy stimulus remained unchanged due to subdued inflation and unstable household sector. continued to evolve constructively, the considerable monetary policy stimulus currently The BOC stated that normalization of these conditions will be gradual. No change in rates is forecast. Technical: USD/CAD : A Completed Three Wave Rally From 1.0180 Is Pointing Lower
4. US Unemployment Claims: Thursday, 12:40. The federal government shutdown and the problems in California continue to skew jobless claims, making it hard to determine a clear trend. Jobless claims dropped by 15,000 to 358,000. Economists expected claims to drop to 335,000 from a slightly revised 373,000 in the previous week. The our week average increased by 11,750 to 336,500, the highest level since late July. California, the nation’s most populous state, is still experiencing processing delays related to a computer upgrade to the state’s filing system in early September. The shutdown effect and processing delays in California could continue to affect results in the coming months. A further decline to 341,000 is anticipated this time.
5. US New Home Sales: Thursday, 14:00. Sales of new single-family homes in the US rebounded slightly in August, reaching an annual rate of 421,000 units, following 390,000 units in the previous month. However this relatively low climb suggests the sharp rise in interest rates is weighing on the U.S. economy. The rise was broadly in line with market expectations. The inventory of new homes for sale increased by 3.6% the highest level since March 2011. Sales of new single-family homes is expected to reach 427,000 now.
6. Mark Carney speaks: Thursday, 16:45. BOE Governor Mark Carney will speak in London at the 125th anniversary of the Financial Times. His words could cause volatility in the market. Recent UK data continued the positive trend, with a big drop in jobless claims.
7. German Ifo Business Climate: Friday, 8:00. Business sentiment in Germany continued to rise in September, reaching 107.7 from 107.6 in August. The index rose for the fifth consecutive month indicating the general recovery in the Euro-area is on track despite its slow pace. Industry is strengthening and domestic demand is growing which is a good sign for future expansion. Another rise to 108.2 is forecast this time.
8. UK GDP: Friday, 8:30. Britain’s recovery accelerated in the second quarter, with GDP expanding by 0.7%, indicating that the UK economy is on a solid path to recovery. The 0.6% quarterly expansion doubled the growth rate of the first quarter, in line with market predictions. Furthermore, in light of the Euro zone crisis in remission, things are looking up for the UK economy. An even better growth rate of 0.8% is forecast by analysts.
9. US Durable Goods Orders: Friday, 12:30. Durable goods orders climbed 0.1% in August, following a 0.7% decline in July. The increase was driven by a strong rise in vehicle orders. Economists expected a flat reading. However durable goods orders excluding transportation, declined by 0.1% missing predictions for a 1.1% rise. The ongoing government shutdown can prove destructive to the US economy. A gain of 0.6% is anticipated now.

*All times are GMT.