Strong data likely to keep euro on solid ground

The US dollar, which slid for much of the week, recovered some losses against the euro and pulled away from a more than eight-month low against the yen earlier in the week. Despite Friday's gains, the greenback remained lower against a basket of currencies for the week.

The dollar traded lower due to a report in the Independent saying Gulf Arab states were in secret talks with Russia, China, Japan and France to replace the US dollar with a basket of currencies in oil trading.

The dollar also came under pressure as investors added to long positions in commodity-linked currencies like the Australian and New Zealand dollars on renewed optimism about a global recovery.

Euro

The euro ended the week on a strong note, rising against currencies like the US dollar and the British pound. The past week saw the European Central Bank's rate decision meeting, where the central bank held interest rates at one per cent and maintained their accommodative stance as economic risks remain balanced.

The week ahead poses limited event risk for the euro. The German ZEW survey due on Tuesday is anticipated to increase to 58.8 for the month of October, the highest since April 2006. On Friday, the euro trade balance is expected to narrow to 2.5 billion euro for the month of August. This would reflect a drop in exports, but would contradict expectations for a rise in industrial output.

Range for previous week: $1.4579-$1.4817 (Dh5.3551 -Dh5.4425).
Range for this week: $1.4600- $1.4950 (Dh5.3628-Dh5.4914)

Sterling

The sterling endured a poor trading week, resulting in it being the only major currency to decline against the US dollar. UK data releases began the week on a bullish trend, with services PMI rising to 55.3, marking the fifth consecutive expansion in the sector. However, this trend came to a halt following weak data releases which weighed down heavily.

Looking towards the week ahead, analyst forecasts are calling for relatively unchanged Consumer Price Index and Jobless Claims figures. The jobless claims readings will remain critical for broader shifts in the market sentiment.

Range for previous week: $1.5824- $1.6120 (Dh5.8124-Dh5.9211).
Range for this week: $1.6050-$1.6250 (Dh5.8954-Dh5.9689)

Yen

The US dollar and Japanese yen were mostly weaker at the start of the week as the G7 statement failed to yield biased comments on the greenback, while surprisingly strong US data helped to incite risk appetite. Indeed, comments from the G7 meeting were not so different from what we've seen in recent months.

This week's calendar includes release of September money supply expected at 0.2 per cent compared to 0.3 per cent last month.

Range for previous week: 87.98 yen-89.88 yen (Dh0.04175 - Dh0.04086).
Range for this week: 88 yen-91 yen (Dh0.04036- Dh0.04174).