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The Trading Week: Feb. 7 - Feb. 11

|Includes: SPDR Dow Jones Industrial Average ETF (DIA), EEA, GBB, GOLD, JYN, QQQ, UDN, USD
Feb. 4, 2011 ( – Following a couple of busy trading weeks for the euro and the U.S. dollar, the lighter on economic data week ahead will shift currency traders’ focus to the pound sterling ahead of the Bank of England interest rate announcement, coupled with industrial production and wholesale inflation reports from the U.K.

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.    AUD- Australia Retail Sales, an important gauge of consumer spending measuring sales at retail establishments, Sun., Feb. 6, 7:30 pm, ET. 

Despite of the floods, consumer spending in Australia is expected to register another month of increase, with retail sales rising by 0.5% m/m from 0.3% in the previous month.

2.    EUR- Germany Industrial Production, the main gauge of industrial activity measuring the output of factories, mines and utilities, Tues., Feb. 8, 6:00 am, ET. 

After the 0.7% m/m drop in November, industrial activity in the Euro-zone’s largest economy is forecast to rise by 0.1% m/m in December.

3.    USD- U.S. Federal Reserve Chairman Testimony for the House Budget Committee on economic conditions and monetary policy, Wed., Feb. 9, 10:00 am, ET.

Chairman Ben Bernanke’s testimony is expected to echo the statement issued at the latest FOMC monetary policy meeting, highlighting the reasons behind the Fed’s decision to stay the course and continue its ultra-accommodative monetary policy of near 0% interest rates, coupled with the $600 billion quantitative easing program of Treasury bond purchases.
4.    AUD- Australia Employment Situation and Unemployment Rate, the main gauges of employment trends and labor market conditions, Wed., Feb. 9, 7:30 pm, ET.

Recovery and rebuilding efforts following the floods in Queensland could boost job creation “down under” as the Australian economy adds up to 20.3K jobs, compared with only 2.3K new jobs created in the previous month. The unemployment rate is forecast to remain low at 5.0%.  

5.    CHF- Swiss CPI- Consumer Price Index, the main measure of inflation preferred by the Swiss National Bank, Thurs., Feb. 10, 3:15 am, ET.

The inflation reports in the weeks and months ahead could become significant risk events for the Swiss franc’s multi-year bullish trend against the U.S. dollar and the euro, especially if the Swiss National Bank warns that the threat of deflation once again looms over the economy. The Swiss inflation gauge is forecast to drop with a reading of -0.1% m/m in January, bringing the annual rate of inflation to 0.4% y/y from 0.5% y/y in December.     

6.    GBP- U.K. Industrial Production and Manufacturing Output, the main gauges of industrial activity measuring the output of factories, mines and utilities, Thurs., Feb. 10, 4:30 am, ET. 

The U.K. manufacturing activity is expected to pick up the pace by 0.5% m/m in December compared with 0.4% in the previous month, in spite of the unexpected GDP contraction in the fourth quarter of 2010.

7.    GBP- Bank of England Interest Rate Announcement, Thurs., Feb. 10, 7:00 am, ET.

Although the Bank of England is likely to maintain the current record low benchmark interest rate at 0.5%, two monetary policy makers voted for a rate hike at the previous meeting and a third Monetary Policy Committee member has joined the hawkish camp with a statement issued last week. The market has been pricing aggressively Q3 rate hike expectations and if the Bank of England confirms that view, the GBP could remain comfortably above the $1.60 mark. 

8.    USD- U.S. Jobless Claims, an important gauge of employment trends and labor market conditions, Thurs., Feb. 10, 8:30 am, ET.

To indicate a significant decline in unemployment, economists estimate that jobless applications would need to fall to 375K or below. In recent weeks applications for unemployment benefits have unexpectedly spiked higher to 454K, but could resume their pull back to the 400K level with a reading of 411K from 415K in the previous week.    

9.    GBP- U.K. PPI- Producer Price Index, a measure of factory-gate inflation on a wholesale level and a leading indicator of consumer inflation, Fri., Feb. 11, 4:30 am, ET.

Wholesale inflationary pressures in the U.K. are expected to subside in December as input price inflation registers a smaller 1.3% increase from 3.4% in November, and output prices forecast to rise by 0.4% m/m compared with the 0.5% increase in the previous month.

10.     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., Feb. 11, 9:55 am, ET. 

The trend of improvement in the U.S. consumer sentiment is forecast to continue with a preliminary estimate of 74.6 in February, slightly higher than the 74.4 reading in the previous month.