Forex Weekly Outlook Nov. 17-21

The US dollar had a mixed week, ending higher against the yen and the pound while retreating against the euro and mostly against commodity currencies. Mario Draghi’s speeches, UK inflation data, rate decisions in Japan, and the FOMC Meeting Minutes, as well as inflation and employment data. These are the major events on FX calendar. Here is an outlook on the highlights of this week.

The US experienced small misses in both jobless claims and JOLTs. However, the high level of voluntary job quits is a sign of confidence. Confidence was also seen in stronger consumption reflected in retail sales as well as consumer confidence. In the euro-zone, growth beat expectations at 0.2% in Q3, with Germany escaping recession and France surprising with stronger growth, but it leans on revisions. The pound took a dive on the BOE’s dovish quarterly report and despite stronger wage growth. The yen continued its slide amid talk of a snap election in Japan and ahead of the GDP release. Commodity currencies made comebacks of sorts, but the loonie could not really withstand another leg down in oil prices. Let’s start:

1. Mario Draghi speaks: Monday, 14:00 & Friday, 8:00. ECB President Mario Dragh is expected to testify before the Committee on Economic and Monetary Affairs, in Brussels and speak in Frankfurt. He could be questioned about the differences within the governing council, that came out to the open. He could also refer to the confirmation of low inflation and poor growth. Market volatility is expected.
2. UK inflation data: Tuesday, 8:30. UK inflation dropped to a five-year low of 1.2% in September following 1.5% the prior month. The main price decline occurred in the energy and food sectors. Despite the strong growth in the UK economy, inflationary pressures remain subdued; it is unlikely that the BoE will raise rates before 2015. UK inflation is expected to remain at 1.2%.
3. German ZEW Economic Sentiment: Tuesday 9:00. Investors’ sentiment plunged in October to its lowest level since November 2012, reaching minus 3.6 points. The ZEW index fell by 10.5 points negative territory, for the first time. Economists expect confidence to remain low over the medium term. Recent disappointing data such as factory orders, industrial production, and foreign trade have contributed to the sharp decline. German economic sentiment is expected to reach 0.9 points this time.
4. US PPI: Tuesday, 12:30. Producer prices for finished goods declined in September by 0.1% following an unchanged reading in the previous month. Economists expected a price rise of 0.1%. Meanwhile, core PPI excluding the volatile food and energy sectors came out flat. Unadjusted, the producer price index for final demand rose 1.6% for the 12 months that ended in September. Producer prices are expected to drop again by 0.1%.
5. Japan rate decision: Wednesday.  The Bank of Japan surprised markets in October while deciding to expand its massive stimulus spending, admitting that economic growth and inflation have not picked up as expected following a sales tax hike in April. BOJ Governor Haruhiko Kuroda announced that the expansion was done to ensure the early achievement of the 2% inflation target and end deflation. Analysts were not expecting further easing measures in such short period.
6. US Building Permits: Wednesday, 12:30. US Building permits increased in September 1.5% to an annualized rate of 1.02 million, suggesting the U.S. economy continues to strengthen despite the global slowdown. Building of multifamily projects such as condominiums and townhomes jumped 16.7 percent to an annual rate of 371,000. Work on single-family properties rose 1.1 percent to a 646,000 rate in September from 639,000 the prior month. The positive trend is also evident in factory production and the job market, posting the lowest level of jobless claims in 14 years.  US Building permits are predicted to reach 1.04 million.
7. FOMC Meeting Minutes: Wednesday, 18:00. The Fed not only ended QE in October, but also had a hawkish message to offer markets, with an upbeat wording on the labor market (“solid job gains”) as well as a lack of real worry regarding inflation. In addition, there was one dovish dissenter for a change. The minutes could reveal the differences between the various members, and could show if they lean to waiting more regarding the rates or moving sooner. September’s minutes were relatively dovish in comparison to the statement. Will this happen again?
8. US Inflation data: Thursday, 12:30. U.S. consumer prices increased mildly in September, showing weak inflation pressures, providing the Federal Reserve ample room to keep interest rates low for an extended period. CPI increased by 0.1% after a 0.2% fall in the previous month. Economists expected a flat reading in September. Sluggish wage growth helped to keep prices nearly unchanged. Meanwhile core CPI excluding food and energy prices, gained 0.1% in September, while the year-on-year change held steady at 1.7%. CPI is expected to drop 0.1% while core CPI is predicted to gain 0.2%.
9. US Unemployment Claims: Thursday, 12:30.  The Labor Department release showed a rise of 12,000 in initial claims last week, reaching 290K. The increase was larger than expected, but remained below 300,000 for ninth straight week indicating the US job market is stronger than ever. Another good sign was a rise in the number of Americans quitting their jobs under their own volition, suggesting stronger confidence in the labor market condition. The number of jobless claims is expected to decline to 286K.
10. US Philly Fed Manufacturing Index: Thursday, 14:00. The manufacturing sector in the Philadelphia region continued to weaken in October, falling to 20.7, after September’s reading of 22.5. However despite the modest decline, Philadelphia manufacturing still shows growth. New orders edged up to 17.3, compared to September’s reading of 15.5; the employment index declined to 12.1, following 21.2 in September; and the six-month outlook dropped to 54.5, compared the precious reading of 56.0. The manufacturing sector in Philadelphia us expected to reach 18.9 this time.

That’s it for the major events this week. Stay tuned for coverage on specific currencies