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Ilian Yotov is a longtime FX Strategist, known among industry peers as the creator of The Quarters Theory, a revolutionary methodology applied to the price behavior of currency exchange rates. His FX market analysis, outlook and forecasts are sought by popular financial publications worldwide... More
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  • Top 10 Forex Events Outlook: Jul. 15-19

    Jul. 14, 2013 (Allthingsforex.com) - Two testimonies on Capitol Hill by the Fed Chairman Ben Bernanke will come to the forefront of the market's attention in the week ahead as traders look for clarity on the future direction of the U.S. central bank's monetary policy.

    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., Jul. 15, 8:30 am, ET.

    Consumer spending in the U.S. is forecast to keep the momentum going with another month of increase by 0.7% m/m in June compared with 0.6% in the previous month.

    2. GBP- U.K. CPI- Consumer Price Index, the main measure of inflation preferred by the Bank of England, Tues., Jul. 16, 4:30 am, ET.

    Inflationary pressures in the U.K. are expected to rise by 3.0% y/y in June, up from the 2.7% y/y reading in May. If economic conditions deteriorate, inflation will not be an obstacle for the Bank of England to ease monetary policy further in upcoming months, but for the time being a jump in inflation should reduce the odds of more easing and could lend some support to the GBP.

    3. EUR- Euro-zone ZEW Economic Sentiment Index, a leading indicator of economic conditions measuring the outlook of financial experts, Tues., Jul. 16, 5:00 am, ET.

    The forward-looking indicator has registered a few months of improvement in economic outlook and this trend is expected to continue with the ZEW index forecast to show a reading of 40.0 in July compared with 38.5 in the previous month. A more optimistic outlook on economic conditions in the euro-area could become euro-supportive but not for too long as the market still sees the European Central Bank stuck firmly in an easing mode.

    4. USD- U.S. CPI- Consumer Price Index, the main measure of inflation in the world's largest economy, Tues., Jul. 16, 8:30 am, ET.

    The U.S. inflation gauge is forecast to inch higher to 1.6% y/y in June from 1.4% y/y in May. Although still far from the Fed's 2.5% threshold, the USD could draw strength from rising inflationary pressures on expectations that the Fed could start to tighten monetary policy sooner rather than later.

    5. USD- U.S. Industrial Production, the main gauge of industrial activity measuring the output of factories, mines and utilities, Tues., Jul. 16, 9:15 am, ET.

    Industrial production is forecast to pick up the pace with a 0.3% m/m increase in June, after staying flat in the previous month.

    6. 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., Jul. 17, 4:30 am, ET.

    Bank of England sat on the sidelines at the first meeting with Mark Carney as the bank's new Governor. The expected 7-2 majority vote against more QE will make it clear that policy makers are not in a hurry to do more easing at this point. On the other hand, the Bank of England's leader also stated that there will be no tightening in the near future. The GBP could see pressures rising if the minutes reveal that more Monetary Policy Committee members, including the new Governor Carney, voted for an increase of the Asset Purchase Program from 375 billion to 400 billion pounds, and if the option of additional QE was once again placed on the table.

    7. USD- U.S. Housing Starts, an important gauge of housing market activity measuring new home construction, Wed., Jul. 17, 8:30 am, ET.

    Housing starts for the month of June are expected to regain their upward momentum with an increase to 950K from 910K in May, while building permits reach the one million mark in June. The report could confirm that the housing market recovery is still intact, despite of the drop in mortgage applications because of higher rates.

    8. CAD- Bank of Canada Interest Rate Announcement, Wed., Jul. 17, 10:00 am, ET.

    With all other major central banks not ready to call the end of the easy policy cycle, the Bank of Canada might not be too adventurous and will more than likely leave the benchmark rate at the current 1.0% level. Compared with the rest of the major central banks, the Bank of Canada still remains as the most likely candidate to tighten monetary policy. However, such decision would probably be pushed further into 2014/2015.

    9. USD- U.S. Federal Reserve Chairman Testimony, Wed. and Thurs., Jul. 17 and 18, 10:00 am, ET.

    All eyes will focus on the Fed Chairman Ben Bernanke's testimonies in front of the House Financial Services Committee and the Senate Banking Committee after last week he reassured the markets that the U.S. central bank's policy will remain "highly accommodative for the foreseeable future". As a result, the USD has come under pressure, but the greenback could see its positive trend continuing if the Fed Chairman signals that tapering of the monthly asset purchases is only a matter of time, despite of the Fed's lack of urgency to end the QE program completely.

    10. GBP- U.K. Retail Sales, an important gauge of consumer spending measuring sales at retail establishments, Thurs., Jul. 18, 4:30 am, ET.

    U.K. consumers may have spent less last month with retail sales forecast to register a smaller increase by 0.4% m/m in June compared with the 2.1% m/m jump in May. A weak retail sales report could increase the odds of more easing by the Bank of England and could weigh on the GBP.

    Jul 14 4:16 PM | Link | Comment!
  • Top 10 Forex Events Outlook: Jul. 8-12

    Jul. 7, 2013 (Allthingsforex.com) - Following a better than expected employment report from the world's largest economy, in the week ahead traders will compare economic conditions on both sides of the Atlantic, as a sequence of notable economic data from the U.S., the U.K., and the euro-zone hits the newswires.

    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 Current Account, an important measure of foreign trade, Sun., Jul. 7, 7:50 pm, ET.

    Compared with a year earlier, the current account surplus in Japan doubled in April to 750 billion yen and is expected to stay in range with 650 billion surplus in May. Further improvement in Japanese economic data could lend temporary support to the yen on reduced odds that the Bank of Japan will need to implement even more aggressive measures to weaken the currency and to stimulate the economy.

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

    After rising by 1.8% m/m in May, industrial activity in the euro-zone's largest economy is forecast to slow with a drop by 0.5% m/m in June. The report could deliver a warning sign that the industrial sector of the largest economy in the euro-zone may be losing momentum.

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

    Recent data from the U.K. has shown signs of improvement and this trend could continue with industrial activity picking up by 0.3% m/m in June, compared with 0.1% m/m in the previous month. The GBP could attract more bids if the U.K. economic data continues to boost optimism and reduces the odds of additional easing by the Bank of England.

    4. 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., Jul. 10, 2:00 pm, ET.

    This is the minutes of the Fed's meeting that shook the markets as the U.S. central bank made it clear that it is considering taking the first step towards monetary policy tightening by reducing the size of its monthly asset purchases. Series of stronger than expected reports from the U.S., including last Friday's non-farm payrolls, have raised the odds that the Fed might tighten even earlier and by a larger amount than initially estimated. The bullish USD trend could accelerate if the minutes confirm such expectations.

    5. AUD- Australia Employment and Unemployment Rate, the two main gauges of labor market conditions measuring job creation and unemployment, Wed., Jul. 10, 9:30 pm, ET.

    Last month's job report showed a smaller job creation of 1,100 new jobs in May and the Australian economy is expected to add only 300 jobs in June, while the unemployment rate inches higher to 5.6% from 5.5%. A weak employment report could raise the odds of another rate cut by the Reserve Bank of Australia and could weigh on the Australian dollar.

    6. JPY- Bank of Japan Interest Rate Announcement, Thurs., Jul. 11, around 12:00 am, ET.

    With economic conditions beginning to improve, the Bank of Japan will not need to get more aggressive at this point but will be likely to reaffirm its commitment to open-ended QE until the 2% inflation target is in sight. As the monetary policies of the Fed and the Bank of Japan continue to diverge, the yen losses could extend further.

    7. EUR- Italy 10-year Bond Auction, Thurs., Jul. 11, around 2:00 am, ET.

    The Italian Treasury will sell its benchmark 10-year government bonds and traders will watch the auction results closely in order to find out if investors will demand higher premiums to hold the debt of the third-largest economy in the euro area. Rising borrowing costs and weak demand could weigh on the euro.

    8. USD- U.S. Jobless Claims, an important gauge of labor market conditions measuring first-time claims for unemployment benefits, Thurs., Jul. 11, 8:30 am, ET.

    The U.S. jobless claims are forecast to head even lower to 335K compared with last week's decline to 343K. Another positive report from the U.S. labor market should keep the USD supported on expectations of a Fed tightening sooner rather than later.

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

    Identical to the German data, industrial activity in the Euro-zone is forecast to slow with a 0.2% m/m drop in June after rising by 0.4% m/m in the previous month. The EUR could stay under pressure if the report sparks concerns that the region's economic recovery is fading.

    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., Jul. 12, 9:55 am, ET.

    The preliminary estimate of the U.S. consumer sentiment index is forecast to show a more optimistic outlook with a reading of 85.3 in July from 84.1 in June. A weekly sequence of upbeat U.S. economic data should keep the bullish USD trend intact.

    Jul 07 8:21 PM | Link | Comment!
  • Top 10 Forex Events Outlook: Jul. 1-5

    Jun. 30, 2013 (Allthingsforex.com) - In the holiday-shortened week ahead, traders will watch the next moves by the European Central Bank and the Bank of England, while gauging the odds of "tapering" of the Fed's asset purchases based on the outcome of the U.S. Non-Farm Payrolls.

    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., Jul. 1, 4:00 am, ET.

    Despite of the index rising in recent months, the chronic contraction in the euro-zone manufacturing sector is likely to continue. The final reading of the Manufacturing Purchasing Managers Index is forecast to be confirmed at 48.7 in June, still below the 50 boom/bust line.

    2. USD- U.S. ISM Manufacturing Index, a leading indicator of economic conditions measuring activity in the manufacturing sector, Mon., Jul. 1, 10:00 am, ET.

    Manufacturing activity in the U.S. slowed down and the index unexpectedly dropped in contraction territory to 49.0 in May, but we could see the sector gaining traction in June with the index climbing back above 50 to 50.6 in June.

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

    There was a recent shift in leadership with the Australian Prime Minister replaced by the previous one. The data in the last few months has shown the country's largest trading partner China slowing, liquidity concerns rising, the mining boom peaking and the "two-speed" Australian economy underperforming. All of this creates an environment in which the Reserve Bank of Australia could be forced to announce another 25 bps rate cut, maybe not at this meeting but sometime in the near future. The Aussie dollar has fallen significantly since the last meeting and could stay under pressure if the central bank makes it clear that policy makers are still willing to ease monetary policy further.

    4. EUR- Euro-zone Services PMI, a leading indicator of economic conditions measuring activity in the services sector, Wed., Jul. 3, 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 48.6 in June from 47.2 in May. Despite of the anticipated increase, the index will be likely to remain below the 50 boom/bust line for yet another month of contraction.

    5. USD- U.S. ADP Employment Report, a measure of job creation in the private sector of the U.S. economy, Wed., Jul. 3, 8:15 am, ET.

    Following the unexpected decline to 135K in May, the U.S. private sector is forecast to pick up the pace of job creation with up to 160K jobs added in June. The report could set the tone for an upbeat non-farm payrolls report on Friday.

    6. USD- U.S. ISM Non-Manufacturing Index, a leading indicator of economic conditions measuring activity in the services sector, Wed., Jul. 3, 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 bounced higher to 53.7 in May and the index is forecast to continue to climb to 54.3 in June.

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

    In the first quarter of the year, the euro-zone economy was unable to return to growth and the final reading 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.

    8. GBP- Bank of England Interest Rate Announcement, Thurs., Jul. 4, 7:00 am, ET.

    The first meeting with the new Bank of England Governor Mark Carney in charge is not very likely to bring any sudden changes in the central bank's monetary policy course. Recent data from the U.K. has shown signs of improvement and there is no need for policy makers to rush to increase the size of the Asset Purchase Program. With the bank expected to start offering forward guidance, future QE expansion will be dependent on the state of the U.K. economy. As long as the Bank of England remains on the QE sidelines, 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., Jul. 4, 7:45 am, ET.

    Conditions in Germany may be getting better in the last few months, but unfortunately, the 17-nation euro-zone is still struggling with record high unemployment and a prolonged recession. In this economic backdrop, the European Central Bank is not going to be willing to tighten monetary policy. Moreover, in an effort to spur economic growth, the ECB might need to consider additional unconventional monetary policy easing measures. The USD could find further strength against the EUR as the Fed gets ready to take the first step towards monetary policy tightening while the European Central Bank remains in an easing mode.

    10. USD- U.S. Non-Farm Payrolls and Employment Situation, the main indicator of U.S. economic health measuring job creation and unemployment, Fri., Jul. 5, 8:30 am, ET.

    The U.S. labor market could continue its current trend with the economy adding up to 165K jobs in June compared with 175K in May, while the unemployment rate inches lower from 7.6% to 7.5%. A decent NFP report will raise the odds that the Fed could reduce the size of its monthly asset purchases sooner than expected and could give the USD a boost.

    Tags: USD, DIA, QQQ, SPY, forex, fx, fomc, ecb, fed
    Jun 30 8:30 PM | Link | Comment!
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