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The Trading Week: Feb. 14 - Feb. 18

|Includes: SPDR Dow Jones Industrial Average ETF (DIA), EEA, GBB, GOLD, JYN, QQQ, UDN, USD
Feb. 11, 2011 ( – In the week ahead, a sequence of U.S. consumer spending, housing, industrial activity and inflation reports will offer more details on the state of the recovery in the world’s largest economy, while crucial inflation data from the U.K. should provide the clues to the future direction of the Bank of England’s monetary policy.    

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.    JPY- Japan GDP- Gross Domestic Product, the main measure of economic activity and growth, Sun., Feb. 13, 6:50 pm, ET.

The preliminary estimate of the Japanese Q4 2010 GDP is forecast to show the economy contracting in the fourth quarter with a reading of -0.5% q/q, down from 1.1% q/q in Q3 2010.

2.    GBP- U.K. CPI- Consumer Price Index, the main measure of inflation preferred by the Bank of England, Tues., Feb. 15, 4:30 am, ET.

The U.K. inflationary pressures are expected remain stubbornly above the Bank of England’s 3.0% ceiling for another month with the consumer inflation gauge forecast to rise by 4.0% y/y in January from 3.7% y/y in December. As long as inflation levels remain elevated, the Bank of England could be prompted to raise rates sooner rather than later.  

3.    EUR- Euro-zone GDP- Gross Domestic Product, the main measure of economic activity and growth, Tues., Feb. 15, 5:00 am, ET.

Following a preliminary estimate of 0.3% q/q, the second reading of the Euro-zone GDP is forecast to bring an upward revision of the fourth quarter economic growth by 0.4% q/q in Q4 2010. 

4.    USD- U.S. Retail Sales, an important gauge of consumer spending measuring sales at retail establishments, Tues., Feb. 15, 8:30 am, ET.

Consumer spending in the U.S. could register another positive month with retail sales forecast to increase by 0.6% m/m in January, same as the 0.6% m/m reading in December.

5.    JPY- Bank of Japan Interest Rate Announcement, Wed., Feb. 16, expected around 12:00 am, ET.

With the Q4 GDP expected to show the Japanese economic growth slowing down, the Bank of Japan could consider additional stimulus for the economy and would be likely to maintain its accommodative monetary policy, keeping the benchmark interest rate in a target band between 0% and 0.10%.  

6.    GBP- Bank of England Inflation Report, the central bank’s official assessment on current inflationary pressures and outlook on future inflation, Wed., Feb. 16, 5:30 am, ET.

In its previous report the Bank of England has said that inflation could rise above 4.0% before easing back to the bank’s comfort level around 2.0%. The market has been pricing aggressively Q3 rate hike expectations and if the report reveals that the Bank of England expects inflationary pressures to continue to rise, the odds for an interest rate hike in the near future would increase, lending support to the pound sterling. 

7.    USD- U.S. Housing Starts, a leading indicator of housing market activity measuring construction of new residential properties, Wed., Feb. 16, 8:30 am, ET.  

Throughout last year, the U.S. housing data has been either weak or mixed, at best, and this report could have a similar outcome with the housing starts registering a slight increase to 540K in January from 530K in December, while building permits decline to 570K from 630K in the previous month.

8.    USD- U.S. Industrial Production, the main gauge of industrial activity measuring the output of factories, mines and utilities, Wed., Feb. 16, 9:15 am, ET.

Manufacturing activity in the U.S. is expected to increase by 0.5% m/m in January, lower than the 0.8% m/m reading in December.

9.    USD- U.S. FOMC- Federal Open Market Committee Meeting Minutes, a comprehensive report of the Fed’s meeting that could provide an outlook on the economy, interest rates and future monetary policy, Wed., Feb. 16, 2:00 pm, ET.

The minutes are expected to highlight 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.

10.     USD- U.S. Jobless Claims, an important gauge of employment trends and labor market conditions, and U.S. CPI- Consumer Price Index, the main measure of inflation in the world’s largest economy, Thurs., Feb. 17, 8:30 am, ET.

After last week’s better-than-expected drop to 384K in the number of Americans filing applications for unemployment benefits, the jobless claims could spike a bit higher with a reading of 410K. Inflationary pressures in the U.S. are forecast to increase with the Core CPI rising by 0.2% m/m and 1.7% y/y in January from 0.1% m/m and 1.5% y/y in December.