All Things Forex's  Instablog

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.

May 5, 2013 (Allthingsforex.com) - In the week ahead, traders will keep an eye on the monetary policy decisions of the Reserve Bank of Australia and the Bank of England, while a sequence of data from "down under", the euro-zone, Japan, and Canada paints a picture of economic conditions in some of the world's biggest industrialized nations.

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. EUR- Euro-zone Retail Sales, an important gauge of consumer spending measuring sales at retail establishments, Mon., May 6, 5:00 am, ET.

Consumer spending in the euro-area is forecast to register a bit smaller decline of 0.1% m/m in April compared with the 0.3% m/m drop in the previous month. However, this report may not be able to change expectations that, after cutting rates to a record low last week, the European Central Bank might need to resort to additional unconventional monetary policy easing measures. Considering the market's reaction following the ECB announcement, more easing could prove supportive for the euro.

2. AUD- Reserve Bank of Australia Interest Rate Announcement, Tues., May 7, 12:30 am, ET.

The inconsistency of the Australian employment reports in recent months, the jump in the unemployment rate, and some signs of a slowdown in China, Australia's largest trading partner, have increased the odds of a rate cut by the Reserve Bank of Australia. While a 0.25% rate cut at this meeting would not be a surprise, we might actually see such decision being delayed by RBA policy makers until additional data in upcoming months provides a clearer picture of the need for additional easing. The Australian dollar could regain strength if the Reserve Bank of Australia refrains from cutting rates.

3. EUR- Germany Industrial Production, the main gauge of industrial activity measuring the output of factories, mines and utilities, Wed., May 8, 6:00 am, ET.

Recent data has shown that the euro-zone's largest economy is cooling off and this report could confirm these suspicions with industrial activity in Germany forecast to drop by 0.3% m/m in March after rising by 0.5% m/m in February.

4. NZD- New Zealand Employment and Unemployment Rate, the two main gauges of labor market conditions measuring job creation and unemployment, Wed., May 8, 6:45 pm, ET.

Employment in New Zealand was down by 1.0% q/q in the previous quarter but is expected to recover with a 1.1% q/q increase. The unemployment rate is forecast to decline to 6.8% from 6.9%. A strong employment report should reduce the odds of monetary policy easing by the Reserve Bank of New Zealand, giving the Kiwi dollar a boost.

5. AUD- Australia Employment and Unemployment Rate, the two main gauges of labor market conditions measuring job creation and unemployment, Wed., May 8, 9:30 pm, ET.

February's blockbuster jobs report which showed a record job creation of 71,500 new jobs was followed by bigger than expected loss of 36,100 jobs in March. In April, the Australian economy is forecast to add up to 12,000 new jobs, while the unemployment rate stays at 5.6%. Another volatile employment report could raise the odds of a rate cut by the Reserve Bank of Australia and could weigh on the Australian dollar.

6. GBP- U.K. Industrial Production, the main gauge of industrial activity measuring the output of factories, mines and utilities, Thurs., May 9, 4:30 am, ET.

The recent improvement in the Services and Manufacturing purchasing managers indexes has shown promising signs that the U.K. may be on a path to recovery. This report could do the same with industrial production forecast to increase for another month by 0.3% m/m in March after rising by 1.0% m/m in February. The GBP should be able to maintain its strength if the U.K. economic data continues to boost optimism and reduces the odds of additional easing by the Bank of England.

7. GBP- Bank of England Interest Rate Announcement, Thurs., May 9, 7:00 am, ET.

With the U.K. economy managing to avoid an unprecedented triple dip recession, there is no urgency for the Bank of England policy makers to do more QE. The Monetary Policy Committee will maintain the existing monetary policy and will keep the size of the Asset Purchase Program unchanged at their May meeting and probably in the next few months until the new Governor Carney takes his seat in July. The pound could continue to attract bids as an alternative to currencies of central banks that are committed to aggressive monetary policy easing.

8. USD- U.S. Jobless Claims, an important gauge of labor market conditions measuring first-time claims for unemployment benefits, Thurs., May 9, 8:30 am, ET.

In the aftermath of last week's four-year low reading of 324K, the U.S. jobless claims are forecast to stay within range, rising slightly to 333K. The unexpected jump to 385K a few weeks ago can now be dismissed as a one-off event and, with the non-farm payrolls beating the forecasts, the USD could continue to benefit from the improvement in U.S. labor market conditions.

9. JPY- Japan Current Account, an important gauge of economic activity measuring foreign trade, Thurs., May 9, 7:50 pm, ET.

The current account deficit in Japan was on the rise in the final quarter of last year, but the significant decline of the yen, which has been helping exporters, could finally begin to produce the desired results. The economy is forecast to register a surplus of 480 billion yen in March after a flat reading in the previous month. This could become one of the reports that confirm that the Bank of Japan may be on the right track with their open-ended QE program. On the other hand, a return to current account surplus could strengthen the yen on expectations that the Japanese government and the Bank of Japan might not need to become even more aggressive with their measures to weaken the currency and to stimulate the economy.

10. CAD- Canada Employment and Unemployment Rate, the two main gauges of labor market conditions measuring job creation and unemployment, Fri., May 10, 8:30 am, ET.

After unexpectedly losing 54.5K jobs in March, the Canadian economy is expected to add up to 14K jobs in April. The unemployment rate is forecast to remain unchanged at 7.2%. The inability to offset the previous month's job losses could signal that the economy may be losing momentum and could weigh on the Canadian dollar.