Forex – Weekly outlook: November 26 – 30

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The euro climbed to a three-week high against the broadly weaker U.S. dollar in holiday-thinned trade on Friday

Market sentiment strengthened after upbeat German economic data and amid new hopes for progress on a deal for Greece.

Trade volumes were light, as U.S. markets closed early for the Thanksgiving weekend.

The euro gained ground after Greece said the International Monetary Fund had relaxed its debt-cutting target for the country, suggesting lenders were closer to a deal for a vital aid tranche to be paid.

However, other sources involved in the talks cautioned that the funding gap was far bigger than Greece has suggested.

Talks between finance ministers and the International Monetary Fund ended without a deal on Tuesday, amid disagreements on how best to reduce the country’s debt to sustainable levels.

Investor confidence also strengthened after the German Institute for Economic Research earlier said that its index of business confidence improved to 101.4 in November from a reading of 100.0 the previous month, beating expectations for a decline to 99.5.

The pound also ended the week at a three-week top against the greenback, after the minutes of the Bank of England’s November meeting published earlier in the week showed that policymakers were split over more monetary easing.

Meanwhile, the yen regained ground against the dollar Friday, but remained close to a seven-month low amid ongoing expectations that upcoming elections on December 16 will result in growing political pressure on the Bank of Japan to implement more aggressive monetary easing measures.

The greenback ended the week at the lowest level since November 7 against the risk sensitive Australian, New Zealand and Canadian dollars.

Official data showed that Canada’s core consumer price inflation, which excludes the eight most volatile items, rose 0.3% in October, in line with expectations, after a 0.2% rise the previous month.

Consumer price inflation rose 0.2% last month, as expected, after a 0.2% increase in September.

In the week ahead market participants will be focusing on Monday’s meeting of the euro group of finance ministers to discuss unlocking Greece’s next aid installment.

Markets participants will also monitor developments surrounding the looming “fiscal cliff” in the U.S., approximately USD600 billion in automatic tax hikes and spending cuts due to come into effect on January 1.

There are fears the U.S. economy will fall back into a recession, unless a divided Congress and the White House can work out a compromise in the seven weeks left before the January 1 deadline.

In addition, the U.S. and U.K. are to release data on third quarter economic growth, amid concerns over the global economic outlook.

Ahead of the coming week, Forexpros has compiled a list of these and other significant events likely to affect the markets.

Monday, November 26

The Bank of Japan is to publish the minutes of its monetary policy meeting, which contain important insights into current and future economic conditions from the bank’s perspective. In addition, BoJ Governor Masaaki Shirakawa is due to speak at an event in Nagoya.

In Europe, Germany is to release the Gfk report on consumer climate, while Switzerland is to produce official quarterly data on the employment level.

Later in the day, New Zealand is to publish official data on the trade balance, the difference in value between imported and exported goods and services.

Tuesday, November 27

The Reserve Bank of New Zealand is to publish data on inflation expectations.

Switzerland is to publish an index of leading economic indicators, which is designed to predict the future direction of the economy.

Elsewhere, the U.K. is to release revised third quarter gross domestic product data, followed by a preliminary report on business investment, a leading indicator of economic health.

Meanwhile, the U.S. is to release official data on durable goods orders, a leading indicator of production, as well as industry data on house price inflation, an important indicator of demand in the housing sector.

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