Trading Week Outlook: September 20 - 24, 2010

by: All Things Forex

In the week ahead all traders will focus on the Federal Open Market Committee monetary policy meeting for confirmation of the market’s expectations that the Fed could keep the door open to further quantitative easing stimulus.

In preparation for the new trading week, here is a list of the Top 10 spotlight economic events that every currency trader should pay attention to.

1. CAD- Canada CPI- Consumer Price Index, the main measure of inflation, Tues., Sep. 21, 7:00 am, ET.

Rising inflationary pressures could improve the odds for the Bank of Canada to extend their campaign of interest rate hikes with inflation forecasted to increase by 0.2% m/m, compared with the 0.1% m/m decline in the previous month.

2. USD- U.S. Housing Starts, a leading indicator of housing market activity measuring construction of new residential properties, Tues., Sep. 21, 8:30 am, ET.

The U.S. housing market could continue to show signs of weakness as the housing starts are expected to decrease to 530 K in August from 546 K in July and the building permits could remain flat at 560 K.

3. USD- U.S. FOMC- Federal Open Market Committee Interest Rate Announcement, Tues., Sep. 21, 2:15 pm, ET.

Low inflation and weak jobs creation should warrant maintaining the benchmark interest rate in the target band between 0% and 0.25% for “extended period”, however, the key element of the FOMC meeting will be whether the Fed decides to offer further monetary stimulus. The market has been pricing-in expectations based on some “whisper numbers” for another round of up to 1 trillion dollars of additional bond purchases.

4. GBP- Bank of England Monetary Policy Committee Meeting Minutes, a comprehensive report of the central bank’s meeting that could provide an outlook on the economy, interest rates and future monetary policy, Wed., Sep. 22, 4:30 am, ET.

The minutes are expected to confirm the Bank of England’s cautiously optimistic outlook on inflation and the economy, but it would be interesting to see if some of the policy makers called for an interest rate increase.

5. NZD- New Zealand GDP- Gross Domestic Product, the main measure of economic activity and growth, Wed., Sep. 22, 6:45 pm, ET.

There has been weakness in the recent economic data from New Zealand and we could see it reflected in the GDP numbers as the economic growth in the second quarter is expected to be lower at 0.5% q/q, compared with 0.6% q/q growth in Q1 2010.

6. EUR- Euro-zone Composite Manufacturing and Services PMI- Purchasing Managers Indexes, two leading indicators of economic conditions measuring the activity of purchasing managers in the manufacturing and services sectors, Thurs., Sep. 23, 4:00 am, ET.

The preliminary flash estimate of the Euro-zone Composite PMI could reveal the early signs of a slowdown, with the manufacturing index forecasted to pull back to 54.6 from 55.1 along with a slight retreat in the services index to 55.5 from 55.9.

7. 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., Sep. 23, 10:00 am, ET.

The report could bring a glimpse of hope from the U.S. housing market as sales of existing homes inch higher to 4.00 M from 3.83 M in the previous month.

8. EUR- Germany IFO Institute Business Climate and Expectations Index, a leading indicator of economic conditions and business expectations in the Euro-zone’s largest economy, Fri., Sep. 24, 4:00 am, ET.

With the German IFO index forecasted to pull back to 106.2 from 106.7, this could become another report in line with the expectations of a future slowdown in the Euro-zone’s largest economy.

9. USD- U.S. Durable Goods Orders, a leading indicator of economic activity measuring durable goods orders placed with domestic manufacturers, Fri., Sep. 24, 8:30 am, ET.

As the U.S. industrial activity cools off, the orders for durable goods could confirm the trend with a drop of 0.7% m/m in August from the 0.4% m/m increase in July.

10. USD- U.S. New Home Sales, an important gauge of housing market conditions measuring the number of newly constructed homes with a committed sale during the previous month, Fri., Sep. 24, 10:00 am, ET.

The U.S. new home sales are forecasted to rise up to 300 K in August from 276 K in the previous month, but considering the expected weakness in the housing starts figures, this report could contain a negative surprise.