Trading Week Outlook: May 30 - June 3, 2011

by: All Things Forex

As China’s reassurance of a back-up for EU sovereign debt has managed to calm some of the market’s fears, in the week ahead traders will shift their attention to a sequence of important economic data from the world’s largest economy, culminating with the U.S. Non-Farm Payrolls and Employment Situation report, for signs of whether the U.S. labor market and economic recovery could be losing momentum.

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. CAD- Canada GDP- Gross Domestic Product, the main measure of economic activity and growth, Mon., May 30, 8:30 am, ET.

The monthly reading of the Canadian GDP is expected to show the economy returning to growth by 0.2% m/m in March, compared with the 0.2% contraction in the previous month. Despite of the February setback, the Canadian economy is forecast to grow stronger by 4.0% q/q in the first quarter of 2011 from 3.3% in Q4 2010.

2. JPY- Japan Industrial Production, the main gauge of industrial activity measuring the output of factories, mines and utilities, Mon., May 30, 7:50 pm, ET.

After the devastating earthquake and tsunami, the Japanese industrial activity is expected to increase by 2.5% m/m in April from the 15.5% drop in March.

3. EUR- Euro-zone Flash HICP- Harmonized Index of Consumer Prices, the main measure of inflation Tues., May 31, 5:00 am, ET.

A week ahead of the European Central Bank’s monetary policy meeting, the preliminary flash estimate of the ECB’s preferred inflation gauge is forecast to show inflationary pressures in the Euro-zone still significantly above the 2% comfort level, rising by 2.9% y/y in May from 2.8% y/y in April.

4. CAD- Bank of Canada Interest Rate Announcement, Tues., May 31, 9:00 am, ET.

With Canada’s largest trading partner, the U.S. economy, slowing in Q1 2011, the Bank of Canada would be likely to sit prudently on the sidelines and to keep the benchmark rate unchanged at 1.0%. On the other hand, as inflation stays significantly above the 2.0% target, currently at 3.3% y/y, it will be interesting to find out if policy markers would express concerns about the rapid rise in inflationary pressures, which could elevate the market’s expectations of a rate hike in the near future.

5. USD- U.S. Consumer Confidence Index of consumers’ outlook on present and future economic conditions, Tues., May 31, 10:00 am, ET.

In the aftermath of last week’s surprisingly positive revision of the consumer sentiment gauge, the U.S. consumer confidence index could follow suit with a reading of 65.8 in May from 65.5 in April.

6. AUD- Australia GDP- Gross Domestic Product, the main measure of economic activity and growth, Tues., May 31, 9:30 pm, ET.

The Australian economy is forecast to grow faster by 1.0% q/q in the first quarter of 2011, compared with 0.7% q/q in Q4 2010, which is expected to bring the year-on-year growth to 3.0% in Q1 2011 from 2.7% in the final quarter of 2010.

7. USD- U.S. ADP-Automatic Data Processing Employment Report, a measure of jobs lost or added to the private sector of the economy, also serving as a leading indicator for the outcome of the monthly non-farm payrolls, Wed., Jun. 1, 8:15 am, ET.

Private sector payrolls are forecast to register a smaller increase by up to 175K in April from the 179K new jobs created in March. An even lower than expected number could add to the market’s already growing concerns about the state of the U.S. job market.

8. 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, Wed., Jun. 1, 10:00 am, ET.

The U.S. manufacturing sector could show signs of a slowdown with an ISM index reading of 59.0 in May, lower than 60.4 in April.

9. USD- U.S. Non-Farm Payrolls and Employment Situation Report, one of the most important indicators of economic health, measuring the number of new jobs created or lost in the world’s largest economy, Fri., Jun. 3, 8:30 am, ET.

Recent U.S. economic data has been unimpressive and this trend could continue with a Non-Farm Payrolls report which is expected to show lesser jobs creation by up to 190K in May from 244K in April. Although the unemployment rate could pull back to 8.9% from a previous reading of 9.0%, a weak jobs report could reinforce the Fed’s view of keeping rates low for “extended period”. In the aftermath of the Non-Farm Payrolls and one week ahead of the European Central Bank’s meeting, if the market’s focus shifts from the debt crisis in the Euro-zone back to pricing ECB rate hike expectations and the Fed’s lack of urgency to exit its ultra-accommodative monetary policy, the USD could come under pressure.

10. USD- U.S. ISM Non-Manufacturing Index, a leading indicator of economic conditions in the services industries: agriculture, mining, construction, transportation, communications, wholesale trade and retail trade, Fri., Jun. 3, 10:00 am, ET.

Activity in the U.S. services industries is expected to expand for another month to 54.0 in May from 53.7 in April.