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Trading Week Outlook: Jun. 27 - Jul. 1

|Includes:SPDR Dow Jones Industrial Average ETF (DIA), EEA, GBB, GOLD, JYN, UDN, USD
Jun. 25, 2011 ( – The week ahead will be crucial for the future fate of the euro as all eyes turn to the vote by the Greek Parliament on the new austerity package and the efforts of EU leaders to avert the first default of a sovereign nation since the creation of the Euro-zone.

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 the income received and purchases made by consumers, released along with the Personal Consumption and Expenditures Price Index- an indicator of inflation preferred by the Federal Reserve, Mon., Jun. 27, 8:30 am, ET.

The Fed’s preferred inflation gauge, the core PCE Index which excludes food and energy costs, is expected to show subdued inflationary pressures with the index increasing by 0.2% m/m in May, same as the previous month’s reading. Consumer spending in the U.S. is forecast to see a reduction with a smaller increase by 0.2% m/m in May from 0.4% m/m in April.

2.    EUR- Greece Austerity Package Vote, the Greek Parliament votes on a new austerity package which includes spending cuts, tax increases and state asset sales, Tues., Jun. 28, expected throughout the day.

This is the key risk event of the week as the Greek Parliament must approve the new 78 billion-euro austerity package in order for Greece to qualify to receive the next tranche of 12 billion-euro aid that will help the country to meet its debt obligations in July. A failure to receive a parliamentary approval of the new austerity measures will push Greece closer to a default, will rattle the financial markets, and could have dire consequences for the euro and the integrity of the Euro-zone. On the other hand, the euro could enjoy a relief rally if the austerity package is approved and the fifth payment under last year’s 110 billion-euro bailout for Greece is ensured. 
3.    GBP- U.K. GDP- Gross Domestic Product, the main measure of economic activity and growth, Tues., Jun. 28, 4:30 am, ET. 

The final reading of the Q1 GDP is forecast to confirm that the U.K. economy grew by 0.5% q/q in the first quarter of 2011, after contracting by 0.5% q/q in Q4 2010. Reduced odds of a Bank of England rate hike in the near future, coupled with weak U.K. economic data and risk aversion could continue to weigh on the GBP. 

4.    USD- U.S. Consumer Confidence Index of consumers’ outlook on present and future economic conditions, Tues., Jun. 28, 10:00 am, ET.

The consensus forecasts point to a slight improvement in the confidence of U.S. consumers with an index reading of 60.9 in June from 60.8 in May.

5.    CAD- Canada CPI- Consumer Price Index, the main measure of inflation, Wed., Jun. 29, 7:00 am, ET.

Inflationary pressures in Canada are forecast to increase by 0.3% m/m in May, bringing the annual rate to 3.6% y/y, while the core CPI, excluding food and energy costs, is expected to rise by 0.2% m/m and 1.8% y/y in May.    

6.    USD- U.S. Pending Home Sales, a leading indicator of housing market activity measuring the amount of homes under contract to be sold, Wed., Jun. 29, 10:00 am, ET.

After the disappointing 3.8% decline in the sales of existing homes to 4.81 million annual rate in May, the pending home sales index is forecast to recover from the 11.6% drop in April with an increase by 0.8% in May.    

7.    EUR- Euro-zone Flash HICP- Harmonized Index of Consumer Prices, the main measure of inflation, Thurs., Jun. 30, 5:00 am, ET.

The preliminary flash estimate of the European Central Bank’s preferred inflation gauge is forecast to confirm the expectations that inflationary pressures in the Euro-zone remain above the ECB 2% comfort level, rising by 2.8% y/y in June from 2.7% y/y in May. An approval of the Greek austerity package, coupled with elevated inflation which raises the odds of a July rate hike by the European Central Bank, could serve as the catalysts for a euro relief rally.

8.    JPY- Japan Tankan Index, Bank of Japan’s quarterly survey of large and small manufacturing and services companies, which serves as the main indicator of economic conditions in Japan, Thurs., Jun. 30, 7:50 pm, ET. 

As a result of the devastating earthquake and tsunami, the Bank of Japan’s benchmark survey is expected to signal a slowdown in the Japanese economic activity in Q2 2011 with a manufacturing sector index reading of -7 from 6 in Q1 and a services sector reading of -3 in Q2 from 3 in the previous quarter.

9.    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. 1, 9:55 am, ET.   

Following the preliminary estimate which showed an unexpected decline in consumer sentiment to 71.8, the revised reading for June is forecast to bring a small increase to 72.1, but still below 74.3 in May.

10.    USD- U.S. ISM Manufacturing Index, a leading indicator of industrial activity, where a reading above or below 50 is the dividing line between economic expansion and contraction, Fri., Jul. 1, 10:00 am, ET.

Although the U.S. manufacturing sector is forecast to register another month of expansion with an ISM index reading of 52.0 in June from 53.5 in May, the move back towards 50 in recent months is hardly an indication of strength in industrial activity.