Weekly Forex Market Outlook: The Market Forces

A relatively light economic calendar besides earning reports from some major companies could help having a clearer picture of the market sentiment to be better prepared to assess the possible reactions to any progress not just in this week but also in the future.

First in four weeks
Equity markets gained last week for the first time in a month. It might be a good sign that a bottom is formed at least in a short term. It is important to note that the U.S. indexes rose even after very disappointing data from retail sales, manufacturing sector, housing market, and consumer sentiment.

Bernanke at Capital Hill
The testimony of the Fed’s Chairman Bernanke at the House Budget Committee on Monday may have the least effect after recent speeches from almost all Fed’s officials. The Leading Indicators is also to be released on Monday and is not expected to be encouraging, but the Friday’s Existing Home Sales could be positive should it show some signs of bottoming in housing market.

Continuing easing policies
Bank of Canada and Reserve Bank of New Zealand are scheduled to set interest rates this week and a significant cut is almost a certain. Another round of easing monetary policies could be encouraging after almost two weeks from coordinated interest rate cuts by major central banks around the world. Expect resuming carry trading when those efforts start to be reflected in money markets rates, such as the Libor, which was the actual factor behind the last week gains.

OPEC meeting on Friday
From their currencies perspective both Canadian and New Zealand dollars can find reasons to appreciate especially against the Japanese yen. RBNZ is expected to reduce its benchmark interest rate by 1.00 percent to 6.50 but it could be still high enough to encourage carry traders benefiting from the yield advantage. It is however very depended on the overall market sentiment at the time.

For the Canadian dollar it is absolutely more challenging. The only benefit might come from speculations about the OPEC meeting on Friday which is expected to cut production to affect the falling oil prices. It is not even clear that such a supply reduction, if occur, could be able to balance the weak demand regarding the increasingly darken outlook for the global economic gross.

Corporate earnings
The earning season continues this week when a company like American Express could give an outlook for the consumer spending in coming months. There are other big names such as Yahoo, Apple, McDonald’s, and Microsoft but it is more important to monitor the market reactions to any deviation from estimates, to find out where the market is located and to what degree a negative outlook is priced.

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