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Weekly outlook: January 9 - 13

01/08/2017

The dollar surged against a basket of the other major currencies on Friday after the U.S. nonfarm payrolls report showed a slowdown in hiring in December but the fastest wage growth in over seven years.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, jumped 0.77% to 102.17 late Friday.

The index had fallen in the previous two sessions after touching a 14-year high of 103.82 on Tuesday.

The Labor Department said the U.S. economy added 156,000 jobs in December from the prior month, while the unemployment rate ticked up to 4.7% from a nine-year low of 4.6% in November.

Economists had forecast payrolls rising by 178,000 jobs last month.

The report also showed that the annual rate of wage growth rose to 2.9% in December from a year earlier, the strongest since 2009.

The employment data indicated that the economy is improving enough for the Federal Reserve to keep pushing up interest rates.

The Fed has indicated that three quarter-percentage-point interest rate increases are on the cards for 2017.

Expectations of higher rates tend to boost the dollar, as higher borrowing costs make the currency more attractive to yield seeking investors.

The dollar rose 1.45% against the yen, with USD/JPY at 117.02 late Friday. The pair ended the week with gains of 0.2%.

The euro fell, with EUR/USD down 0.67% at 1.0532 in late trade.

Sterling was also sharply lower against the dollar, with GBP/USD falling 1.08% to trade at 1.2283.

The pound remained on the back foot as traders awaited a decision on what part parliament will play in Brexit negotiations.

The dollar was lower against the Mexican peso with USD/MXN down 0.5 to 2255 after Mexico’s central bank confirmed that it had intervened in the foreign exchange market to shore up its currency.

The Mexican peso has been hard hit by the election of Donald Trump as U.S. president, amid concerns over the impact on trade between the two countries.

In the week ahead, investors will be looking ahead to U.S. economic reports, particularly Friday’s retail sales figures for December.

Investors will also be watching an appearance by Fed Chair Janet Yellen on Thursday and speeches by a handful of other Fed officials during the week.

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

Monday, January 9

Financial markets in Japan will be closed for a holiday.

Australia is to release data on building approvals.

The U.K. is to release industry data on house price inflation.

Boston Fed President Eric Rosengren and Atlanta Fed President Dennis Lockhart are to speak.

Tuesday, January 10

Australia is to report on retail sales.

China is to release data on consumer and producer prices.

Canada is to publish figures on building permits.

Also Wednesday, U.S. President-elect Donald Trump is scheduled to hold his first post-election news conference, which investors will be watching for any hints about the possible direction of economic policy.

Wednesday, January 11

The U.K. is to release a report on manufacturing and industrial production as well as trade data.

Thursday, January 12

The European Central Bank is to publish the minutes of its last monetary policy meeting.

Canada is to report on new house price inflation.

The U.S. is to release the weekly jobless claims report along with data on import prices.

Fed Chair Janet Yellen is to speak at an event in Washington.

Also Thursday, Philadelphia Fed President Patrick Harker, Chicago Fed President Charles Evans, Atlanta Fed's Dennis Lockhart, St. Louis Fed President James Bullard and Dallas Fed President Rob Kaplan are due to speak.

Friday, January 13

China is to report on the trade balance.

The U.S. is to round up the week with reports on retail sales, producer prices and a preliminary look at consumer sentiment.

Philadelphia Fed President Patrick Harker is also to speak.