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The Trading Week: Nov. 1 - Nov. 5

|Includes: SPDR Dow Jones Industrial Average ETF (DIA), EEA, GBB, GOLD, JYN, QQQ, UDN, USD
Oct. 30, 2010 ( – The Fed’s QE2 decision all traders have been waiting for will come in the busy trading week ahead filled with crucial U.S. economic data, which will culminate with the FOMC interest rate announcement and the U.S. Non-Farm Payrolls employment report.

In preparation for the new trading week, here is a list of 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- a leading indicator of inflation preferred by the Fed because it measures a variable basket of goods and services, as opposed to the CPI-Consumer Price Index which measures a fixed basket of goods and services; Mon., Nov. 1, 8:30 am, ET.

Inflationary pressures in the U.S. could remain subdued with the core PCE Index expected to register the same as the previous month’s increase of 0.1% m/m, while consumer spending in September picks up by 0.4% m/m.  

2.    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, Mon., Nov. 1, 10:00 am, ET.

The manufacturing sector leading the U.S. economic recovery is forecast to expand for another month, but at a slower pace with a reading of 54.0 in October from 54.4 in September.
3.    AUD- Reserve Bank of Australia Interest Rate Announcement, Mon., Nov. 1, 11:30 pm, ET.

Although the Reserve Bank of Australia is widely-anticipated to raise rates by 0.25% at this meeting, the unexpectedly lower inflationary pressures in Australia shown by the recent CPI data, coupled with concerns of a slowdown in China, could make the Reserve Bank of Australia policy makers less hawkish on the prospects for further interest rate hikes.

4.    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 preliminary estimate for the outcome of the monthly non-farm payrolls, Wed., Nov. 3, 8:15 am, ET.

Private sector payrolls declined by 39K in September, but they are expected to see an increase by up to 25K in October, which could offer a glimpse of hope for the jobs sector.

5.    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, Wed., Nov. 3, 10:00 am, ET.

Just as the manufacturing sector, the activity in the services industries could also see a pullback to 53.0 from a previous reading of 53.2.

6.    USD- U.S. FOMC- Federal Open Market Committee Interest Rate Announcement, Wed., Nov. 3, 2:15 pm, ET.

The QE2 round of Treasury bond purchases by the Fed may be certain, but its size is not. Whether it is a “Shock and Awe” QE move of up to $1 trillion, or smaller $100 billion portions at a time, will be the key to the Fed’s meeting. The market has been pricing-in the more aggressive option, but the potential for a shock in the “shock and awe” expectations camp should not be excluded.

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

The Bank of England is expected to keep the benchmark rate at the record low level of 0.50%. The positive U.K. Q3 GDP surprise reduced the odds for expansion of the bank’s Asset Purchase Program at this meeting. However, policy makers could decide to keep the door open to a future expansion of the quantitative easing program by up to GBP 50 Bn, especially if the U.K. economic data continues to soften as the spending cuts take their toll on the economy.

8.    EUR- European Central Bank Interest Rate Announcement, Thurs., Nov. 4, 8:45 am, ET.

The European Central Bank would be likely to maintain rates unchanged at 1.0%, but it would be important to see if the ECB policy makers will choose the tightening route and decide to let some of the accommodative monetary policy programs to expire in Q4 2010.

9.    CAD- Canada Employment Situation and Unemployment Rate, the main gauge of employment trends and labor market conditions, Fri., Nov. 5, 7:00 am, ET.   

Following the disappointing jobs report in September, the Canadian economy could add up to 10.1 K jobs in October as the unemployment rate remains unchanged at 8.0%. 

10.    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., Nov. 5, 8:30 am, ET.  
Provided that there are no negative surprises, this could become a positive employment report with the U.S. economy expected to add up to 45K jobs in October compared with the 95K jobs lost in September, while the unemployment rate remains unchanged at 9.6%. Non-farm payrolls in the private sector are forecast to rise by up to 60K from 64K in the previous month.