Forex - Weekly outlook: October 17-21

Investing.com – Last week saw the euro rally against the U.S. dollar, climbing to a four-week high on Friday, boosted by optimism over a proposed plan to resolve the financial crisis in the single currency bloc.

On Friday, France and Germany appeared to move closer to an agreement on a plan to recapitalize European lenders, bolster the firepower of the euro zone’s bailout fund, the European Financial Stability Facility and restructure Greek sovereign debt.

At the conclusion of the G-20 summit on Saturday, world financial leaders urged the region’s leaders to deal “decisively” with the crisis. European leaders may complete the rescue plan at a summit on October 23, in time to present to a meeting of G-20 leaders early next month.

Risk appetite was also boosted after data on Friday showed that U.S. retail sales rebounded in September, increasing at the fastest rate in seven months.

The Commerce Department said sales rose 1.1% last month, after a revised 0.3% increase in August, outstripping expectations for a 0.5% gain.

Commodity linked currencies preformed strongly as risk appetite sharpened, with the Australian dollar closing at a one-month high against the greenback after its biggest one-week rally in almost three years.

Elsewhere, the pound hit a one-month high against the greenback on Friday, moving in lockstep with the euro but concerns over weakening economic conditions in the U.K. saw sterling remain lower against the single currency.

Earlier this month, the Bank of England embarked on a second round of quantitative easing, in an effort to stimulate demand in the faltering British economy.

Meanwhile, the yen fell against the greenback on Friday, after Japanese government officials said they were ready to take fresh steps to curb the appreciation of the yen as soon as next week. The steps may include more funding to encourage Japanese firms to acquire overseas businesses and natural resources but are not believed to include a tax on currency transactions.

In the week ahead, any signs that European Union leaders are making progress on steps to contain the debt crisis in the euro zone look likely to continue to support risk appetite. Meanwhile, the U.S. is to publish a string of economic data, with reports on manufacturing, housing and inflation to come.

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

Monday, October 17

The U.K. is to publish industry data on house price inflation, an important indicator of the health of the housing sector. Australia is to release official data on new vehicle sales, a leading indicator of consumer confidence.

Later in the day, the U.S. is to publish government data on industrial production and the capacity utilization rate. The country is also to publish data on manufacturing activity in New York state, a leading indicator of economic health.

Also Monday, Canada is to produce government data on foreign securities purchases, while the Bank of Canada is to publish its quarterly report on the outlook for business.

Tuesday, October 18

The Reserve Bank of Australia is to publish the minutes of its most recent policy-setting meeting. The minutes will be closely watched as they give investors an important insight into economic conditions from the bank’s perspective.

The U.K. is to publish official data on consumer price inflation, which accounts for the majority of overall inflation.

In the euro zone, the ZEW Centre for Economic Research is to publish a report on economic sentiment in Germany, a leading indicator of economic health. The centre is also to publish a report on sentiment in the wider single currency bloc.

Later Tuesday, the U.S. is to produce government data on producer price inflation, a leading indicator of consumer inflation, as well as data on the balance of domestic and foreign investment in the U.S. Meanwhile, Federal Reserve Chairman Ben Bernanke is to speak in Boston; his remarks will be closely watched for any clues to the future possible direction of monetary policy.

Wednesday, October 19

Australia is to publish an index of leading economic indicators, designed to predict the future direction of the economy. Later in the day, Canada is also to publish an index of leading economic indicators.

The euro zone is to publish a report on the current account, while in the U.K. the BoE is to publish the minutes of the most recent policy-setting meeting. The minutes will be closely watched as they give investors an important insight into economic conditions from the bank’s perspective.

The U.S. is to release a flurry of data, with a government report on building permits, an excellent gauge of future construction activity as well as data on housing starts, a leading indicator of economic health. The U.S. is also to publish data on consumer price inflation, which accounts for the majority of overall inflation. In addition, the country is to publish data on crude oil stockpiles, while the Fed is to publish its Beige Book, which looks at current economic conditions.

Thursday, October 20

Australia is to publish a report on business confidence, an important indicator of economic health.

Switzerland is to release official data on the trade balance, the difference in value between imports and exports over the month. Meanwhile, the ZEW Centre for Economic Research is to publish a report on Swiss economic expectations, a leading indicator of economic health.

Elsewhere in Europe, the U.K. is to produce government data on retail sales, the foremost indicator of consumer spending, which accounts for the majority of overall economic activity.

In the euro zone, Germany is to publish official data on producer price inflation, a leading indicator of consumer inflation.

Later Thursday, the U.S. is to publish its weekly report on initial jobless claims, as well as data on manufacturing activity in Philadelphia and an industry report on existing home sales.

In addition, Canada is to publish a government report on wholesale sales, a leading indicator of consumer spending.

Friday, October 21

Australia is to publish official data on import prices, which contribute to inflation. Elsewhere, in Japan, Bank of Japan Governor Masaaki Shirakawa is to speak at an event in Tokyo; his comments will be closely watched for clues regarding future monetary policy.

The U.K. is to publish a report on consumer confidence, an important indicator of economic health. Later in the day, the country is to produce a report on public sector borrowing.

In the euro zone, the Ifo Institute is to publish a report on German business climate, while European Central Bank President Jean-Claude Trichet is to speak at an event in Warsaw; his remarks will be closely watched for any clues to the future possible direction of monetary policy.

Canada is to round up the week with government data on consumer price inflation, which accounts for the majority of overall inflation.