Dollar consolidates ahead of key US, Europe statistics

Dubai: The US dollar ended the past week with mixed results against the major currencies. The dollar lost out against the New Zealand dollar, Australian dollar and Japanese yen, however rose against the Swiss franc, euro, Canadian dollar and British pound. However, the week proved to be merely a period of consolidation for the dollar.

The dollar was helped on by positive data about the US economy. The Conference Board's consumer confidence index unexpectedly surged to a threemonth high in August, increasing to 54.1 from 47.4. US durable goods orders also increased sharply by 4.9 per cent in July, the biggest rise in two years.

There are a number indicators due for release in the coming week which could potentially spark breakouts for the dollar.

Tuesday's ISM manufacturing index is projected to rise above 50 for the first time since January 2008.

Wednesday will see the release of the Federal Reserve's August 12 meeting minutes which could be market moving. The ISM non-manufacturing index will be released on Thursday.

Markets will be particularly interested in the US non-farm payroll report, due on Friday. It is expected to show job losses for the 20th straight month in August, however the rate of decline is expected to slow further.

The euro experienced a week of choppy trade, closing the week almost unchanged despite increasing to near year-to-date highs against the dollar. The past week produced strong economic fundamentals pointing towards economic recovery in the euro zone.

Euro zone economic confidence improved sharply from 76.0 to 80.6 as reflected in the German IFO and ZEW survey. The region's largest economies, Germany and France, have both posted improvement in second quarter economic growth.

Looking to the week ahead, markets are expecting the European Central Bank to leave interest rates unchanged at 1 per cent on Thursday, leaving little risk for major price action.

Where the currency ends the day is likely to be influenced by what ECB president Jean-Claude Trichet says during his post meeting press conference.

Other potentially market moving data include euro zone consumer price index, unemployment rate, retail sales, PMI and German retail sales, all due for release over the course of the week.

Range for previous week: $1.4260 - $1.4327 (Dh5.2376 - Dh5.2623)

Range for this week: $1.4200- $1.4450 (Dh5.2157 - Dh5.3075)

Sterling ended the week as the worst performer among all G10 currencies falling to a two and a half month low against the euro on Thursday. To begin with, the currency was already under pressure, weighed down by speculation of more quantitative easing from the Bank of England, following last week's meeting minutes which showed three members voting to increase their £125 billion asset purchase scheme by a further £75 billion.

Over the coming week, markets will look towards the Purchasing Manager's Index (PMI), manufacturing, construction and services reports.

All three surveys are good indicators of economic growth and are expected to show improvement in August.

Range for previous week: $1.6388 - $1.6719 (Dh6.0235 - Dh6.1710)

Range for this week: $1.6126 - $1.6480 (Dh5.9232 - Dh6.0531)

The Japanese yen traded lower after it was put under pressure by weak economic fundamentals and stronger equity market trades.

Japan's Labour market continued to disappoint in July, with jobless rate rising more than expected to a 33 year high of 5.7 per cent.

Core Consumer Price Index fell by a record 2.2 per cent year on year, increasing the risk of deflation in Japan. Midweek Japan also reported a sharp drop in July exports.

The major event in Japan next week is the nation's general election. Such a political event is always market moving.

Apart from this, general risk appetite trends could also cause strong ripples for the yen over the coming week.

Range for previous week: 94.40 to 97.72 yen (Dh0.03691 - Dh0.03846)

Range for this week: 92.64 to 94.75 yen (Dh0.03876 - Dh0.03965)