With another fairly light week on the economic calendar investors will continue to monitor developments on trade and Turkey. Wednesday’s U.S retail sales report will be eyed, amid expectations for an increase in July from the previous month.
In the UK, the latest jobs and inflation data will be in focus after the Bank of England hikes rates earlier this month, while euro zone figures on inflation and second quarter growth will also be closely watched.
The dollar rallied to its highest level in more than a year against a currency basket on Friday, as a selloff in the Turkish lira spurred a flight to safety amid fears over contagion effects, particularly on European banks exposed to the Turkish currency.
Turkey’s currency plunged after U.S. President Donald Trump escalated a feud with Ankara by doubling tariffs on metals imports. The lira had already come under heavy selling pressure amid concerns over President Tayyip Erdogan's influence over monetary policy.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, surged 0.76% to 96.19 late Friday, the most since June 27, 2017. The index gained 1.33% for the week.
The euro tumbled to a 13-month low, with EUR/USD falling as low as 1.1388, before pulling back to 1.1410 in late trade, down 1.01 for the day%.
The drop in the single currency came as the European Central Bank warned that a number of euro zone banks might be exposed to the sharp decline in the Turkish lira.
Meanwhile, Russia’s ruble fell to its lowest level since early June 2016 Friday, weighed down by the broadly stronger dollar, falling oil prices and concerns over the impact of a fresh round of U.S. sanctions.
The pound fell to its lowest level since June 2017, with GBP/USD down 0.44% at 1.2771 in late trade, pressured lower by fears over the growing prospect of a ‘no-deal’ Brexit.
Commodity linked currencies were also hard hit by the spike in risk aversion, with the Australian dollar losing 1.04% to trade at 0.7295 late Friday.
Ahead of the coming week, has compiled a list of significant events likely to affect the markets.
Monday, August 13
The U.S. is to release data on mortgage delinquencies.
Tuesday, August 14
Australia is to release data on business confidence.
China is to publish a report on fixed asset investment and industrial production.
The UK is to publish its latest employment report.
The euro zone is to release a preliminary estimate of second quarter economic growth.
The ZEW Institute is to report on German economic sentiment.
Wednesday, August 15
Australia is to publish figures on the wage price index.
The UK is to release inflation data.
The U.S. is to produce data on retail sales, along with reports on industrial production, labor costs and manufacturing activity in the New York region.
Thursday, August 16
Australia is to publish its latest employment report.
The UK is to report on retail sales.
Canada is to publish figures on manufacturing sales.
The U.S. is to release reports on building permits, housing starts, jobless claims and manufacturing activity in the Philadelphia region.
Friday, August 17
The euro area is to release revised inflation data.
Canada is to produce its latest report on consumer price inflation.
The U.S. is to round up the week with preliminary data on consumer sentiment.