All Things Forex's  Instablog

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.

Apr. 28, 2013 (Allthingsforex.com) - The next moves by the world's two major central banks and the condition of the U.S. labor market will be on top of the agenda in the week ahead, as the markets prepare for a likely announcement of additional monetary policy easing by the European Central Bank.

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. Personal Income and Outlays, a measure of consumer income and spending, released along with the PCE Price Index- the Fed's preferred gauge of inflation, Mon., Apr. 29, 8:30 am, ET.

Consumer spending in the U.S. is forecast to register a smaller increase by 0.2% m/m in March, compared with 0.7% m/m in February. The Fed's preferred core PCE Index could show inflation inching slightly higher by 0.1% m/m, but not enough to convince the Federal Open Markets Committee to change the direction of its current monetary policy.

2. USD- U.S. Pending Home Sales, a leading indicator of housing market activity measuring pending home sale contracts, Mon., Apr. 29, 10:00 am, ET.

After dropping by 0.4% m/m in February, the pending home sales index is expected to get back on track with 0.3% m/m increase in March.

3. EUR- Euro-zone HICP- Harmonized Index of Consumer Prices, the main measure of inflation preferred by the European Central Bank, Tues., Apr. 30, 5:00 am, ET.

Inflation in the euro-area is forecast to subside further to 1.6% y/y in April from 1.7% y/y in March. With the inflation gauge dropping 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.

4. USD- U.S. Consumer Confidence, a measure of consumers' outlook on the economy, Tues., Apr. 30, 10:00 am, ET.

The outlook of U.S. consumers is forecast to remain optimistic, keeping the consumer confidence index above 60 with reading of 60.5 in April from 59.7 in the previous month.

5. USD- U.S. ADP Employment Report, a measure of job creation in the private sector of the U.S. economy, Wed., May 1, 8:15 am, ET.

Job creation in the U.S. private sector is forecast to be less than it was in the previous month with 145K jobs added in April, compared with 158K jobs in March.

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

Activity in the U.S. manufacturing sector is forecast to lose a bit of steam with a reading 51.1 in April from 51.3 in March.

7. USD- U.S. FOMC- Federal Open Markets Committee Interest Rate Announcement, Wed., May 1, 2:00 pm, ET.

Recent reports from the labor market and other sectors of the economy have sparked concerns that the U.S. may be losing momentum. In addition, the world's largest economy will be dealing with the impact from the sequestration in the months ahead. Such economic backdrop does not create a sense of urgency for the Fed to start tightening anytime soon. The FOMC will maintain the current monetary policy course at its May meeting, and probably into 2014. The majority of policy makers will be likely to reiterate their commitment to open-ended QE until the unemployment rate falls below 6.5% or inflation exceeds 2.5%. No end in sight to QE and "exceptionally low levels for the federal funds rate" could weigh on the USD.

8. EUR- European Central Bank Interest Rate Announcement, Thurs., May 2, 7:45 am, ET.

Mired in recession and record high unemployment, the euro-zone economy continues to suffer from a chronic contraction in its manufacturing and services sectors. With economic growth still nowhere to be seen, it would not be shocking to witness the European Central Bank announcing additional monetary policy easing measures as early as the next meeting on May 2. The euro will be pushed back into the $1.20′s if the European Central Bank announces LTRO 3, reduces the benchmark rate or hints of an impending rate cut in the near future.

9. USD- U.S. Non-Farm Payrolls and Employment Situation, the main indicator of U.S. economic health measuring job creation and unemployment, Fri., May 3, 8:30 am, ET.

Following a dismal NFP report in March, job creation is expected to gain momentum in April. The U.S. economy is forecast to add 155K jobs compared with 88K in March, while the unemployment rate stays unchanged at 7.6%. An upbeat NFP report should help to dismiss last month's unexpected drop as a one-off event and could give the USD a boost on expectations that the Fed might take the first step toward monetary policy tightening sooner rather than later.

10. USD- U.S. ISM Non-Manufacturing Index, a leading indicator of economic conditions measuring activity in the services sector, Fri., May 3, 10:00 am, ET.

Although at a slightly slower pace, activity in the U.S. services sector is forecast to expand for another month with an index reading of 54.1 in April from 54.4 in March.