5 Central Bank Meetings Will Make for a Busy Trading Week in the FX Market (page 2 of 2)

The unemployment rate remained unchanged but the job to applicant ratio fell to 1.02, reflecting the tough conditions that the Japanese economy still faces.

Euro Extends Losses Despite Strongest Consumer Price Growth Hits 6 Year High

The Euro extended its losses today and is on its way to testing 1.45. Although we are still long term Euro bullish, the Euro could now fall to 1.44 before it rises back to 1.50. Economic data continues to support further Euro gains. Consumer prices in the Eurozone hit a 6 year high of 3 percent in November, which is the strongest pace of growth in more than 5 years. This is well above the ECB's 2 percent target and if it were not for weakening growth, the central bank would probably be rushing to raise interest rates. Third quarter GDP was stronger than expected, but that is old news. Eurozone consumer confidence in the month of November and German retail sales for the month of October were much weaker than expected. Collectively this will force the ECB to sit on their hands next week while screaming about the need for tight monetary policy.

British Pound Continues to Weaken on Softer Consumer Confidence

With financial market turmoil taking a big toll on the UK economy, it would be surprising if consumer confidence actually held steady. In the month of November confidence plunged to a 4 year low, reflecting mortgage concerns and rising prices. The Bank of England will be meeting to decide on monetary policy next week and currently a rate cut is not expected. However it is important to be careful because the BoE is notorious for catching the market by surprise. We have seen many instances where the market did not expect a rate cut, yet the BoE delivered one anyway, so do not be surprised if the Bank of England actually cuts interest rates.

Canadian Dollar Hits Parity, Australian and New Zealand Dollars Extend Losses

The Canadian dollar fell back to parity with the US dollar after the release of their GDP numbers. Growth last month was right in line with expectations but the data was more positive than negative given strong readings in both Q2 and Q3 GDP. Business investment led the rise, but goods and industrial production weakened in September which means that the latest numbers reflect the recent deterioration in the Canadian economy. The Australian and New Zealand dollars also sold off, but that was primarily due to a broad based dollar rally and drop in commodity prices because the Australian current account balance was actually stronger than the market's forecast.