All Things Forex's  Instablog

Jun. 16, 2013 (Allthingsforex.com) - In the week ahead all eyes will focus on the Federal Open Markets Committee meeting in search for clues of the Fed's willingness to take the first step toward monetary policy tightening.

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., Jun. 18, 4:30 am, ET.

Inflationary pressures in the U.K. are forecast to rise to 2.7% y/y in May from 2.4% y/y in April. A pickup in the level of inflation could make it more difficult for the Bank of England to ease monetary policy in upcoming months.

2. EUR- Euro-zone ZEW Economic Sentiment Index, a leading indicator of economic conditions measuring the outlook of financial experts, Tues., Jun. 18, 5:00 am, ET.

The ZEW index is expected to show a month of improvement with a reading of 38.0 in June compared with 36.4 in the previous month. The euro could get a boost from a report that instills optimism that recovery is underway in the euro-area.

3. USD- U.S. Housing Starts, a leading indicator of housing market activity measuring construction of new residential properties, Tues., Jun. 18, 8:30 am, ET.

The weekly sequence of U.S. housing market data could start on a high note with housing starts forecast to increase to 924K in May from 853K in April. Strong U.S. data should continue to raise the odds of the Fed tightening monetary policy sooner rather than later.

4. JPY- Japan Trade Balance, an important gauge of economic activity measuring the difference between imports and exports, Tues., Jun. 18, 7:50 pm, ET.

Finally, after all these months of significant yen weakness, the trade balance data could begin to show better results with the Japanese economy forecast to register a trade surplus of 1.2 trillion yen in May compared with 362 billion yen trade deficit in April. Signs that the economy is improving could reduce expectations that the government and the Bank of Japan would step up their efforts to devalue the yen and to spur economic growth.

5. 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., Jun. 19, 4:30 am, ET.

As expected, the Bank of England sat on the sidelines in June and the minutes will probably confirm that policy makers were not rushing to make any changes a month before the bank's new Governor Mark Carney takes his seat. Although we could see once again that some members voted for an increase of the Asset Purchase Program from 375 billion to 400 billion pounds, the overall content of the minutes report is not likely to deliver any surprises. The GBP, which has managed to stage a nice rally in recent weeks, could remain supported if the minutes do not hint of any impending easing moves by the Bank of England.

6. USD- U.S. FOMC Interest Rate Announcement, Wed., Jun. 19, 2:00 pm, ET.

With the recent jobs report showing the economy creating more jobs in May but revealing some weaknesses like the unemployment rate inching higher and the participation rate declining, the Fed will be in no hurry to reduce the size of its monthly asset purchases. There is no doubt that the US central bank is considering taking the first step towards monetary policy tightening, but getting the timing of the QE reduction right will be a difficult task and the current fragile economic environment may not be very supportive of such move. The FOMC will probably remind the markets that policy can be adjusted depending on economic conditions, but will be more likely to stay the course with open-ended QE until the unemployment rate falls below 6.5% or inflation exceeds 2.5%. The USD could come under pressure if the Fed does not signal "tapering" of QE.

7. CHF- Swiss National Bank Interest Rate Announcement, Thurs., Jun. 20, 3:30 am, ET.

In recent weeks, Swiss National Bank officials have made it clear that maintaining the franc cap at 1.20 per euro is "the right policy for the foreseeable future". The Swiss central bank will more than likely echo this statement following its meeting. We could see unwinding of CHF long positions if the Swiss National Bank hints that it may be willing to consider additional options to weaken its currency.

8. EUR- Euro-zone Composite PMI- Purchasing Managers Index, a leading indicator of economic conditions measuring activity in the manufacturing and services sectors, Thurs., Jun. 20, 4:00 am, ET.

Although the index might inch a bit higher, no relief from the chronic contraction in the euro-zone manufacturing and services sectors is expected to be seen yet. The Composite PMI is forecast to remain below the 50 boom/bust line for another month with a reading of to 48.1 in June from 47.7 in May. The euro could stay under pressure if the report fails to instill optimism that conditions in the euro-area are improving.

9. GBP- U.K. Retail Sales, an important gauge of consumer spending measuring sales at retail establishments, Thurs., Jun. 20, 4:30 am, ET.

The disappointing 1.3% m/m drop in April is expected to be followed by 0.8% m/m increase in retail sales in May. The GBP could stay well bid if the report does not deliver a negative surprise.

10. 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, Thurs., Jun. 20, 10:00 am, ET.

Sales of existing homes in the U.S. are forecast to break slightly above the 5 million mark with a reading of 5.01 million in May from 4.97 million in April. Further improvement of the housing and labor markets should be U.S. dollar supportive on expectations that the Fed could start reducing the size of its monthly asset purchases earlier than expected.

Jun. 9, 2013 (Allthingsforex.com) - The euro will be closely watched during the upcoming week which could mark a new phase in the euro-area's debt crisis as the German Constitutional Court convenes to debate and make a decision on the legality of the country's participation in bailout funds and sovereign debt purchases.

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. JPY- Japan GDP- Gross Domestic Product, the main measure of economic activity and growth, Sun., Jun. 9, 7:50 pm, ET.

The revised GDP estimate is expected to confirm that the world's third-largest economy returned to growth by 0.9% 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 a long overdue price correction has gotten underway in the last couple of weeks and the yen strength could continue if better-than-expected economic data from Japan reduces expectations of the need for additional easing measures by the Bank of Japan.

2. JPY- Bank of Japan Interest Rate Announcement, Tues., Jun. 11, around 12:00 am, ET.

The Bank of Japan will be likely to reaffirm its commitment to open-ended QE until the 2% inflation target is in sight. Although the bank is not expected to step up its efforts at this point, it would be interesting to see if the central bank surprises the market with an announcement of even more aggressive easing due to the recent rapid rise of the yen. Should the Bank of Japan choose to sit on the sidelines, the yen rally could extend further.

3. EUR- Germany Constitutional Court Ruling on Bailouts Participation, Tues., Jun. 11, and Wed., Jun. 12, all day events.

The German Constitutional Court will gather for two days of hearings on the legality of the country's contribution to bailout funds like the European Stability Mechanism and the European Central Bank's OMT bond-buying program. Some experts have already named it "the most important risk event" that could lead to a showdown between Germany and the ECB and could reignite the crisis in the euro-area. In recent years, the court ruled out an injunction intended to freeze the ESM, but at the same time tied politicians' hands by capping Germany's ESM contribution at 190 billion euro. Judges blocked the proposal of a bank license for the ESM, killed off hopes of eurobonds, debt-pooling, or fiscal union by prohibiting the Parliament from "accepting liability for decisions by other states". Although the German high court may not announce its ruling for several weeks or may even pass the decision making to the European Court of Justice where an approval would be much more likely, uncertainty about the outcome of the event could elevate anxiety levels and could increase the pressure on the euro.

4. GBP- U.K. Industrial Production, the main gauge of industrial activity measuring the output of factories, mines and utilities, Tues., Jun. 11, 4:30 am, ET.

Las week's series of stronger Services, Construction and Manufacturing PMIs could be followed by a weaker overall industrial sector data with industrial production forecast to drop by 0.3% m/m in April after rising by 1.0% m/m in March.

5. 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., Jun. 12, 4:30 am, ET.

Jobless claims in the U.K. dropped by 7,300 in March, but are forecast to register a smaller decline by about 6,800 in April, while the unemployment rate stays unchanged at 7.8%. A weaker-than-expected jobs report would increase the odds of more easing by the Bank of England when the new Governor Carney takes his seat in July and could trigger a correction of the pound's recent gains.

6. EUR- Euro-zone Industrial Production, the main gauge of industrial activity measuring the output of factories, mines and utilities, Wed., Jun. 12, 5:00 am, ET.

After rising by 1.0% m/m in March, industrial activity in the euro-zone is forecast to stumble with a 0.2% m/m drop in April. The EUR will not be likely to get a boost from data that fails to instill optimism that the region's economy is on a path to recovery.

7. NZD- Reserve Bank of New Zealand Interest Rate Announcement, Wed., Jun. 12, 5:00 pm, ET.

In a world where competitive currency devaluation has become the norm, the New Zealand central bank will not be in a hurry to start tightening monetary policy. The central bank joined "currency wars" in February with the Governor warning that intervention is being considered as an option to curb the persistent strength of the New Zealand dollar. The Kiwi has recently fallen and could weaken further if the Reserve Bank of New Zealand makes it clear that rates will not rise anytime soon.

8. AUD- Australia Employment and Unemployment Rate, the two main gauges of labor market conditions measuring job creation and unemployment, Wed., Jun. 12, 9:30 pm, ET.

Following April's strong jobs report which showed 50,100 new jobs created, the Australian economy is expected to lose 9,800 jobs in May, while the unemployment rate inches higher to 5.6% from 5.5%. A weak employment report could raise the odds of a rate cut by the Reserve Bank of Australia and could weigh on the Australian dollar.

9. USD- U.S. Retail Sales, an important gauge of consumer spending measuring sales at retail establishments, Thurs., Jun. 13, 8:30 am, ET.
Consumer spending in the U.S. is expected to recover from the disappointing 0.2% m/m drop in April with an increase by 0.3% m/m in May.

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., Jun. 14, 9:55 am, ET.

The preliminary estimate of the U.S. consumer sentiment index is forecast to show further improvement with a reading of 84.9 in June from the four-year high of 84.5 in the previous month. Following the decent Non-Farm Payrolls report last Friday, stronger U.S. economic data in the week ahead could boost the US dollar on expectations that the Fed might begin the "tapering" of its asset purchases in upcoming months.

Jun. 2, 2013 (Allthingsforex.com) - Three monetary policy announcements by major central banks and the U.S. Non-Farm Payrolls report will make for an intriguing week ahead as traders watch the next move by European Central Bank and gauge the odds of "tapering" of the Fed's asset purchases based on the condition of the U.S. labor market.

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 Manufacturing PMI, a leading indicator of economic conditions measuring activity in the manufacturing sector, Mon., Jun. 3, 4:00 am, ET.

Although the index is expected to bounce a bit higher, the chronic contraction in the euro-zone manufacturing sector is likely to continue for another month. The revised estimate of the Manufacturing Purchasing Managers Index is forecast to show a reading of 47.8 in May, compared with 46.7 in April.

2. USD- U.S. ISM Manufacturing Index, a leading indicator of economic conditions measuring activity in the manufacturing sector, Mon., Jun. 3, 10:00 am, ET.

Manufacturing slowed down to 50.7 in April and activity could remain subdued with an index reading of 50.5 in May.

3. AUD- Reserve Bank of Australia Interest Rate Announcement, Tues., Jun. 4, 12:30 am, ET.

With its largest trading partner slowing, the mining boom peaking and the "two-speed" Australian economy underperforming, the Reserve Bank of Australia could be forced to announce another rate cut following the 25 bps reduction in May. The Aussie dollar has fallen significantly since the last meeting and could stay under the pressure if the central bank lowers the benchmark rate to 2.5% and warns about the negative effects of persistent currency strength.

4. EUR- Euro-zone Services PMI, a leading indicator of economic conditions measuring activity in the services sector, Wed., Jun. 5, 4:00 am, ET.

The final reading is expected to be in line with the preliminary estimate which showed activity in the euro-zone services sector inching higher to 47.5 in May from 47.0 in April. Despite of the anticipated increase, the index will remain below the 50 boom/bust line for yet another month of contraction.

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

In the first quarter of the year, the euro-zone economy was unable to return to growth and the revised estimate is forecast to confirm that the economy contracted by 0.2% q/q, prolonging the recession for a third consecutive quarter. With no end to its recessionary period and not much optimism that the economy might be turning a corner in the near future, the EUR could be pushed lower on expectations of additional easing by the European Central Bank.

6. USD- U.S. ADP Employment Report, a measure of job creation in the private sector of the U.S. economy, Wed., Jun. 5, 8:15 am, ET.

Following the unexpected decline to 119K in April, the U.S. private sector is forecast to pick up the pace of job creation with up to 170K jobs added in May.

7. USD- U.S. ISM Non-Manufacturing Index, a leading indicator of economic conditions measuring activity in the services sector, Wed., Jun. 5, 10:00 am, ET.

Reaching its weakest level in nine months with a drop to 53.1 in April, activity in the U.S. services sector could bounce higher with a reading of 53.4 in May.

8. GBP- Bank of England Interest Rate Announcement, Thurs., Jun. 6, 7:00 am, ET.

The hopes that the latest weak retail sales report automatically means more easing by the Bank of England may prove to be misguided, especially if the U.K. manufacturing and services PMI reports throughout the week signal that activity is picking up. Granted, the drop in consumer spending is not to be taken lightly, but it will take more bad data before the Monetary Policy Committee decides to increase the size of the Asset Purchase Program. For the time being, the U.K. economy has comfortably managed to avoid an unprecedented triple dip recession in Q1, the new Governor Mark Carney is to take his seat on July 1, and there is simply no urgency for the Bank of England policy makers to do anything in June, except to maintain the status quo. It will then be up to Mr. Carney to steer monetary policy depending on the state of the U.K. economy. Until the Bank of England rejoins the QE party, the pound should remain as a viable alternative to currencies whose central banks are committed to aggressive monetary policy easing.

9. EUR- European Central Bank Interest Rate Announcement, Thurs., Jun. 6, 7:45 am, ET.

Despite of some recent signs that conditions in Germany may be improving, the 17-nation euro-zone is struggling with record high unemployment and economic growth is still nowhere to be seen. This is why it would not be a surprise to see the European Central Bank resorting to additional unconventional monetary policy easing measures that could be announced as early as the June meeting. Expectations that the ECB will continue to look for ways to spur economic growth with further easing could serve as a catalyst to push the euro further into the $1.20′s.

10. USD- U.S. Non-Farm Payrolls and Employment Situation, the main indicator of U.S. economic health measuring job creation and unemployment, Fri., Jun. 7, 8:30 am, ET.

Job creation in the U.S. could keep the momentum going with the economy adding up to 180K jobs in May compared with 165K in April, while the unemployment rate stays unchanged at 7.5%. A strong NFP report could boost the USD on expectations that the Fed might be one step closer to reducing the size of its monthly asset purchases.