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The Trading Week: Jan. 24 - Jan. 28

|Includes: SPDR Dow Jones Industrial Average ETF (DIA), EEA, GBB, GOLD, JYN, QQQ, UDN, USD
Jan. 21, 2011 ( – The first FOMC monetary policy meeting for 2011 and the main gauge of economic activity and growth in the world’s largest economy will take the center stage in a busy trading week filled with important economic data from major industrialized nations. 

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.    AUD- Australia CPI- Consumer Price Index, the main measure of inflation, Mon., Jan. 24, 7:30 pm, ET.

Inflationary pressures could prompt the Reserve Bank of Australia to extend the campaign of rate hikes into 2011 as the inflation gauge is forecast to rise by 0.8% q/q in Q4 2010 from 0.7% q/q in the third quarter.

2.    JPY- Bank of Japan Interest Rate Announcement, Tues., Jan. 25, expected around 12:00 am, ET.

The Bank of Japan is expected to maintain its accommodative monetary policy stance, keeping the benchmark interest rate unchanged within a record low target band between 0% and 0.10%, while at the same time, closely-monitoring currency exchange rates for “disorderly moves” in the Japanese yen. 
3.    GBP- U.K. GDP- Gross Domestic Product, the main measure of economic activity and growth, Tues., Jan. 25, 4:30 am, ET.

The preliminary estimate of the U.K. GDP is expected to show slower economic growth by 0.5% q/q in the fourth quarter, compared with the 0.7% q/q growth in Q3 2010.

4.    CAD- Canada CPI- Consumer Price Index, the main measure of inflation, Tues., Jan. 25, 7:00 am, ET.

With the Bank of Canada viewing “underlying pressures affecting prices” as “subdued”, the inflation gauge is forecast to register a small increase by 0.2% m/m from 0.1% in the previous month. 

5.    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., Jan. 26, 4:30 am, ET.

Stubbornly high inflation and the threat of economic slowdown as a result of the U.K. government’s massive spending cuts create a difficult situation for the Bank of England policy makers. The minutes are expected to confirm that, despite of the three-way division in the vote, the Monetary Policy Committee continues to avoid taking the quantitative easing route with an expansion of the Asset Purchase Program.   

6.    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, Wed., Jan. 26, 10:00 am, ET.

The second part of last week’s housing data is forecast to show the U.S. new home sales rising to 303 K in December from 290 K in November.

7.    USD- U.S. FOMC- Federal Open Market Committee Interest Rate Announcement, Wed., Jan. 26, 2:15 pm, ET. 

Although the Fed is likely to continue its QE2 program and keep the benchmark interest rate near 0%, the latest remarks from the Philly Fed President Charles Plosser raise the odds that the Fed could consider tightening its ultra-accommodative monetary policy sooner rather than later, especially if the economy continues to grow and the labor market improves. According to Mr. Plosser, “if economic growth in the United States continues to gain traction and the prospects begin to look ever better, it might be time for us to begin thinking about how do we begin to gradually take our foot off the accelerator”. Should the majority of the Fed’s policy makers share this view and make it known in their statement following the meeting, the market could begin to price such expectations more aggressively, which could be supportive for the U.S. dollar. 
8.    NZD- Reserve Bank of New Zealand Interest Rate Announcement, Wed., Jan. 26, 3:00 pm, ET.

Lackluster economic growth, coupled with expectations of a slowdown in China and Australia, reduce the urgency for the Reserve Bank of New Zealand to raise rates. The central bank is forecast to keep the benchmark rate at its current 3.0% level.

9.    USD- U.S. Jobless Claims, an important gauge of employment trends and labor market conditions, and Durable Goods Orders, a leading indicator of economic activity measuring durable goods orders placed with domestic manufacturers, Thurs., Jan. 27, 8:30 am, ET.   

After the jobless claims resumed their trend of improvement last week with lesser-than-expected Americans filing for unemployment benefits, the consensus forecasts are pointing to a small increase in jobless claims to 409K from 404K in the previous week. Orders for durable goods could recover from the 0.3% November fall with an increase by 0.9% in December.

10.     USD- U.S. GDP- Gross Domestic Product, the main measure of economic activity and growth in the world’s largest economy, Fri., Jan. 28, 8:30 am, ET.   

The busy trading week will end with its second-most important spotlight economic event bringing the first estimate of the U.S. Q4 2010 GDP which is forecast to show faster U.S. economic growth by 3.5% in the fourth quarter, up from 2.6% in Q3 2010.