All Things Forex's  Instablog

May 19, 2013 (Allthingsforex.com) - With the Bank of Japan's announcement and the minutes of the Fed's May meeting on the agenda, the week ahead will offer further insight into the future plans of these two major central banks and their unprecedented monetary policy easing efforts.

In preparation for the new trading week, here is a list of the Top 10 spotlight economic events that will move the markets around the globe.

1. GBP- U.K. CPI- Consumer Price Index, the main measure of inflation preferred by the Bank of England, Tues., May 21, 4:30 am, ET.

Inflationary pressures in the U.K. are forecast to see a slight pullback to 2.7% y/y in April from 2.8% y/y in March. Although the CPI remains above the Bank of England's 2% target, inflation has subsided significantly from last year and could continue to inch lower as the bank pointed in its latest inflation report.

2. JPY- Japan Trade Balance, an important gauge of economic activity measuring the difference between imports and exports, Tues., May 21, 7:50 pm, ET.

The consensus forecasts point to another month of rising trade deficit by 621 billion yen in April from a deficit of 362.4 billion yen in March, despite of the significant devaluation of the yen since November, 2012. However, there may be a potential for a positive surprise as the Japanese economy managed to turn a corner and returned back to growth in the first quarter, while also registering a current account surplus. If the report fails to instill optimism and triggers concerns that economic conditions are not improving, the yen could remain under pressure on expectations that the Bank of Japan might be forced to step up their efforts to weaken the currency as a tool to stimulate export growth.

3. JPY- Bank of Japan Interest Rate Announcement, Wed., May 22, around 12:00 am, ET.

As the impact of the Bank of Japan's massive amounts of asset purchases begins to be reflected in the latest economic data which has registered better than expected readings, the Japanese central bank will probably not feel the need to do more at this point. Policy makers will be likely to reaffirm their open-ended commitment to aggressive QE until the 2% inflation target is in sight. A Bank of Japan not in a hurry to step up its easing efforts could trigger a long overdue correction of the yen's losses.

4. GBP- Bank of England Meeting Minutes, a detailed report of the bank's latest meeting containing an outlook on monetary policy and the economy, Wed., May 22, 4:30 am, ET.

In recent months, the Bank of England has chosen to sit on the QE sidelines while other central banks have either continued or have resorted to additional monetary policy easing. The GBP has benefited from the Bank of England's restraint and could continue to lure bids should the minutes confirm that the majority of policy makers see no urgency to increase the size of the Asset Purchase Program.

5. USD- U.S. Existing Home Sales, the main gauge of the condition of the U.S. housing market measuring the number of closed sales of previously constructed homes, condominiums and co-ops, Wed., May 22, 10:00 am, ET.

Following last week's surprising drop in housing starts, we could witness a more upbeat U.S. housing market data with sales of existing homes forecast to increase to 4.99 million in April, compared with 4.92 million in March.

6. USD- U.S. FOMC Meeting Minutes, a detailed report of the Fed's latest meeting containing an outlook on monetary policy and the economy, Wed., May 22, 2:00 pm, ET.

At its May meeting, the Fed signaled that the size of monthly asset purchases may be reduced or increased depending on economic conditions. The minutes would probably confirm this stance, while echoing the Fed's decision to stay on the QE course until the unemployment rate drops below 6.5% or inflation rises above 2.5%. The USD could see pressures rising if the report reassures the markets that the Fed's open-ended quantitative easing is not going away anytime soon.

7. EUR- Euro-zone Composite PMI- Purchasing Managers Index, a leading indicator of economic conditions measuring activity in the manufacturing and services sectors, Thurs., May 23, 4:00 am, ET.

The euro-zone economy is expected to continue to suffer from the chronic contraction in its manufacturing and services sectors as the Composite PMI stays in contraction territory below the 50 boom/bust line for another month with a reading of 47.0 in May from 46.9 in April. With the economy failing to return to growth in the first quarter of 2013, the report could weigh on the EUR by increasing the odds that the European Central Bank might be forced to announce additional monetary policy easing measures as early as the bank's next meeting on June 6.

8. GBP- U.K. GDP- Gross Domestic Product, the main measure of economic activity and growth, Thurs., May 23, 4:30 am, ET.

In the first quarter of 2013, the U.K. managed to avoid a triple-dip recession with the economy growing by 0.3% q/q after contracting by 0.3% q/q in the final quarter of last year. The revised reading is expected to be in line with the preliminary estimate, confirming that disaster has been averted. Provided that there are no unexpected surprises, the report should reduce further the odds of more QE by the Bank of England and could boost the GBP.

9. USD- U.S. New Home Sales, an important gauge of housing market conditions measuring sales of newly-constructed homes, Thurs., May 23, 10:00 am, ET.

Similar to the existing home sales, a small increase is also expected in the U.S. new home sales, with consensus forecasts estimating a reading of 429K in April compared with 417K in March.

10. EUR- Germany IFO Business Climate Index, a leading indicator of economic conditions measuring the outlook of businesses, Fri., May 24, 4:00 am, ET.

After the shocking drop in the ZEW economic sentiment index, the business outlook in the euro-zone's largest economy is forecast to be a bit more optimistic with the Ifo index rising to 104.6 in May from 104.4 in April. The EUR could continue to feel the pressure if the index disappoints and paints a dire economic picture, increasing the probability of more easing by the European Central Bank.

May 12, 2013 (Allthingsforex.com) - Economic growth or the lack there of will be the themes of the week ahead as traders eye the GDP estimates from the euro-area and Japan and determine whether the euro-zone has managed to turn a corner in the first quarter of the year.

In preparation for the new trading week, here is the outlook for the Top 10 spotlight economic events that will move the markets around the globe.

1. USD- U.S. Retail Sales, an important gauge of consumer spending measuring sales at retail establishments, Mon., May 13, 8:30 am, ET.

Consumer spending in the U.S. could remain subdued for a second month in a row with retail sales down by 0.3% m/m in April, following the 0.4% m/m drop in March. However, some optimistic forecasters predict a 0.1% m/m increase in retail sales. The USD could benefit from a more upbeat economic data that will raise the odds that the Fed could consider reducing the size of its monthly asset purchases if economic conditions continue to improve.

2. EUR- Euro-zone ZEW Economic Sentiment Index, a leading indicator of economic conditions measuring the outlook of financial experts, Tues., May 14, 5:00 am, ET.

Declining more than expected to 36.3 in April, the ZEW index is forecast to bounce a couple of points higher with a reading of 38.5 in May. Should the index disappoint once again and send a signal that the economic outlook for the euro-area remains gloomy, the EUR could stay under pressure as the market prices expectations that the European Central Bank might ease monetary policy further.

3. GBP- U.K. Jobless Claims and Unemployment Rate, the main gauges of labor market conditions measuring claims for unemployment benefits and rate of unemployment, Wed., May 15, 4:30 am, ET.

Jobless claims in the U.K. dropped by 7,000 in March and are forecast to register a smaller decline by about 3,000 in April, while the unemployment rate inches higher to 8.0% from 7.9% in the previous month. A better-than-expected jobs report would reduce the odds of more easing by the Bank of England and could lend support to the GBP.

4. EUR- Euro-zone GDP- Gross Domestic Product, the main measure of economic activity and growth, Wed., May 15, 5:00 am, ET.

The main event of the week will bring the preliminary GDP estimate for the first quarter of the year and the report is not expected to show that the euro-zone economy was able to end its recessionary period. Forecasts point to a fourth consecutive quarter of contraction by 0.1% q/q in Q1 2013 from -0.6% in the last quarter of 2012. Provided that there are not any positive surprises from the GDP estimate, the EUR could be pushed further into the $1.20's as the market begins to price even more aggressively expectations that the European Central Bank might be forced to consider additional rate cuts and unconventional monetary policy easing measures that could be announced as early as the bank's June meeting.

5. GBP- Bank of England Inflation Report, the central bank's official analysis and outlook on inflation and the economy, Wed., May 15, 5:30 am, ET.

While the CPI remains above the Bank of England's 2% target at 2.8% y/y, after reaching record high levels above 5% last year, inflation in the U.K. has subsided. If policy makers expect this trend to continue and forecast a "nascent recovery" in the months ahead, the report will reduce the probability of more QE by the Bank of England and could boost the GBP as an alternative to currencies whose central banks are committed to aggressive monetary policy easing.

6. USD- U.S. Industrial Production, the main gauge of industrial activity measuring the output of factories, mines and utilities, Wed., May 15, 9:15 am, ET.

The slowdown shown by the manufacturing index in recent months could be reflected in the overall industrial production data with industrial output forecast to decline by 0.1% m/m in April, after rising by 0.4% m/m in March.

7. JPY- Japan GDP- Gross Domestic Product, the main measure of economic activity and growth, Wed., May 15, 7:50 pm, ET.

With the yen in a free-fall since last November, the effects of the weaker currency are finally beginning to show in the latest economic data from Japan. The world's third-largest economy is forecast to return to growth by 0.7% q/q in the first quarter of 2013 after the flat 0% q/q reading in the final quarter of last year. The negative JPY trend is still intact, but it would be interesting to see if better-than-expected economic data from Japan would start to be yen-supportive going forward, as the market reduces expectations of the need for even more aggressive easing measures by the Bank of Japan.

8. EUR- Euro-zone HICP- Harmonized Index of Consumer Prices, the main measure of inflation preferred by the European Central Bank, Thurs., May 16, 5:00 am, ET.

In line with the preliminary estimate, inflation in May is forecast to decline to 1.2% y/y from 1.7% y/y in April. With the inflation gauge dropping further below the European Central Bank's 2% target, the formation of deflationary pressures could become one of the main factors that could prompt the ECB into additional monetary policy easing.

9. USD- U.S. Housing Starts, an important gauge of housing market activity measuring new home construction, Thurs., May 16, 8:30 am, ET.

After the stronger than expected rise to 1.04 million in March, housing starts could pull back to 980K in April, while building permits increase to 940K from 910K in the previous month.

10. USD- U.S. Consumer Sentiment, the University of Michigan's monthly survey of 500 households on their financial conditions and outlook of the economy, Fri., May 17, 9:55 am, ET.

Compared with the unimpressive 76.4 reading in the previous month, the preliminary estimate of the U.S. consumer sentiment index is forecast to show an improvement to 77.9 in May. The USD could continue to find strength if the weekly sequence of U.S. economic data does not disappoint and confirms that the recovery in the world's largest economy is on the right track.

In the trading room today: Big Week Ahead for the EUR and the JPY. With the euro-zone and the Japanese Q1 2013 GDP estimates scheduled for release next week, we explore the potential impact of these important economic reports and focus on the EUR and the JPY as the currencies to watch closely, we list the Top 10 spotlight economic events that will move the markets in the week ahead, we examine the consensus forecasts for the upcoming economic data, we analyze the weakness in the EUR/USD currency pair, we take a close look at the bullish breakout in the USD/JPY pair, we keep an eye on the pullback in the GBP/USD currency pair, we highlight the market's reaction to the Japanese Current Account and the Canadian Employment report, we discuss new forecasts from Deutsche Bank, Barclays and UBS, and prepare for the trading session ahead.