USD: Waiting for Wednesday’s Federal Reserve announcements

The dollar finished last week near its 14-year-highs against other major currencies as US JOLTS jobs openings grew more than expected while continuing jobless claims shrank to 2 million for the week, signaling a strengthening labor market.

This week we’re seeing investors take profits (as they did last Monday) on the high-value greenback ahead of the Federal Reserve’s meeting on Wednesday. While nearly all investors expect the Fed will raise interest rates by a paltry 25 basis points, they’ll be focusing more on the central bank’s rate hike plans for 2017. If the projections surprise analysts with more than two planned interest rate increases, the dollar could strengthen and reach fresh highs. Beyond this week’s Fed meeting, look for November’s trade inflation data out Tuesday morning, followed by retail sales, producer inflation, and industrial production results out on Wednesday morning before Fed members speak. Thursday morning will bring weekly jobless claims, consumer inflation, and two manufacturing activity surveys for November, while Friday morning’s building permits and housing starts will finish out the week.

EUR: Could hit fresh lows this week against a Fed-boosted US dollar

The euro almost fell to its 20-month-lows last week after the European Central Bank unexpectedly announced it would slow and extend its stimulus (aka quantitative easing) through December 2017 to try and boost the Eurozone’s economy.

The shared currency is beginning to recover this week against a weaker US dollar as investors digest last week’s ECB announcement. On Tuesday morning, we’ll see the latest consumer inflation readings out of Germany, Portugal, and Spain as well as Italy’s industrial output and the broader Eurozone’s Q3 employment readings. Wednesday morning will bring consumer inflation data from France and Italy along with the broader Eurozone’s latest industrial production results. Look for December’s preliminary business activity data out of Italy, Germany, and the broader Eurozone on Thursday morning. Friday morning will finish out the data week with Germany’s wholesale inflation results and the Eurozone’s trade balance and consumer inflation data from November. As has been the case in past weeks, the euro could continue to slide closer to parity this week if the US dollar continues to gain unless the Eurozone’s economy has a significantly positive surprise.

GBP: Hopes for strong inflation and no surprises from Thursday’s Bank of England meeting

The pound lost ground last week after productivity data showed the UK’s manufacturing and industrial productivity unexpectedly shrinking during October, breaking the UK’s recent trend of positive economic readings.

Sterling begins this week with only hopes for better economic news over the next few days. Investors will be watching Tuesday morning’s data closely as November’s retail, housing, producer, and consumer inflation data comes out. Wednesday morning brings the latest jobless claims report and average earnings (worker wages) results from August through October. On Thursday morning we’ll see how the UK’s retail sales did in November before the Bank of England’s December meeting, where investors aren’t expecting any interest rate changes. Friday morning’s industrial trends survey will finish out the week data wise. Assuming the Bank of England doesn’t bring surprises on Thursday, the pound could recover if this week presents strong UK inflation growth or a weakening US dollar.

CAD and AUD: Oil to drive CAD, AUD hopes for stronger economic data

The Canadian dollar rose to its mid-October highs last week as oil prices continued surging from OPEC production cuts. Stronger-than-expected building permits and new housing price growth also helped lift the northern currency. The loonie starts this week with momentum on a 4% jump in oil prices after non-OPEC countries said this past weekend that they would follow OPEC in cutting oil production. With Thursday morning’s manufacturing shipment numbers from October and a speech from Bank of Canada governor Poloz being the only significant events scheduled this week, look for oil prices to continue driving the currency over the next few days.

The Australian dollar ended slightly lower last week as the latest GDP data showed the country’s economy unexpectedly contracting in the third quarter. That said, strong consumer and producer inflation results out of China (Australia’s largest trading partner) helped keep the currency from suffering deeper losses. The Aussie dollar is starting strong this week as commodity prices jump and as investors await Monday evening’s Q3 housing price readings and a business confidence survey, along with China’s retail sales and industrial production results. Tuesday evening will show us November’s new motor vehicle sales and the latest consumer confidence survey, while Wednesday evening will finish out the data week with December’s consumer inflation forecasts and November’s employment numbers. Investors will be looking for signs of economic contraction from this week’s releases to see if Q3’s shrinking GDP was an anomaly or the potential start of a negative trend.