Apr. 28, 2013 (Allthingsforex.com) - The next moves by the world's two major central banks and the condition of the U.S. labor market will be on top of the agenda in the week ahead, as the markets prepare for a likely announcement of additional monetary policy easing by the European Central Bank.
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. USD- U.S. Personal Income and Outlays, a measure of consumer income and spending, released along with the PCE Price Index- the Fed's preferred gauge of inflation, Mon., Apr. 29, 8:30 am, ET.
Consumer spending in the U.S. is forecast to register a smaller increase by 0.2% m/m in March, compared with 0.7% m/m in February. The Fed's preferred core PCE Index could show inflation inching slightly higher by 0.1% m/m, but not enough to convince the Federal Open Markets Committee to change the direction of its current monetary policy.
2. USD- U.S. Pending Home Sales, a leading indicator of housing market activity measuring pending home sale contracts, Mon., Apr. 29, 10:00 am, ET.
After dropping by 0.4% m/m in February, the pending home sales index is expected to get back on track with 0.3% m/m increase in March.
3. EUR- Euro-zone HICP- Harmonized Index of Consumer Prices, the main measure of inflation preferred by the European Central Bank, Tues., Apr. 30, 5:00 am, ET.
Inflation in the euro-area is forecast to subside further to 1.6% y/y in April from 1.7% y/y in March. With the inflation gauge dropping below the European Central Bank's 2% target, the formation of deflationary pressures could become one of the main factors that could prompt the ECB into additional monetary policy easing.
4. USD- U.S. Consumer Confidence, a measure of consumers' outlook on the economy, Tues., Apr. 30, 10:00 am, ET.
The outlook of U.S. consumers is forecast to remain optimistic, keeping the consumer confidence index above 60 with reading of 60.5 in April from 59.7 in the previous month.
5. USD- U.S. ADP Employment Report, a measure of job creation in the private sector of the U.S. economy, Wed., May 1, 8:15 am, ET.
Job creation in the U.S. private sector is forecast to be less than it was in the previous month with 145K jobs added in April, compared with 158K jobs in March.
6. USD- U.S. ISM Manufacturing Index, a leading indicator of economic conditions measuring activity in the manufacturing sector, Wed., May 1, 10:00 am, ET.
Activity in the U.S. manufacturing sector is forecast to lose a bit of steam with a reading 51.1 in April from 51.3 in March.
7. USD- U.S. FOMC- Federal Open Markets Committee Interest Rate Announcement, Wed., May 1, 2:00 pm, ET.
Recent reports from the labor market and other sectors of the economy have sparked concerns that the U.S. may be losing momentum. In addition, the world's largest economy will be dealing with the impact from the sequestration in the months ahead. Such economic backdrop does not create a sense of urgency for the Fed to start tightening anytime soon. The FOMC will maintain the current monetary policy course at its May meeting, and probably into 2014. The majority of policy makers will be likely to reiterate their commitment to open-ended QE until the unemployment rate falls below 6.5% or inflation exceeds 2.5%. No end in sight to QE and "exceptionally low levels for the federal funds rate" could weigh on the USD.
8. EUR- European Central Bank Interest Rate Announcement, Thurs., May 2, 7:45 am, ET.
Mired in recession and record high unemployment, the euro-zone economy continues to suffer from a chronic contraction in its manufacturing and services sectors. With economic growth still nowhere to be seen, it would not be shocking to witness the European Central Bank announcing additional monetary policy easing measures as early as the next meeting on May 2. The euro will be pushed back into the $1.20′s if the European Central Bank announces LTRO 3, reduces the benchmark rate or hints of an impending rate cut in the near future.
9. USD- U.S. Non-Farm Payrolls and Employment Situation, the main indicator of U.S. economic health measuring job creation and unemployment, Fri., May 3, 8:30 am, ET.
Following a dismal NFP report in March, job creation is expected to gain momentum in April. The U.S. economy is forecast to add 155K jobs compared with 88K in March, while the unemployment rate stays unchanged at 7.6%. An upbeat NFP report should help to dismiss last month's unexpected drop as a one-off event and could give the USD a boost on expectations that the Fed might take the first step toward monetary policy tightening sooner rather than later.
10. USD- U.S. ISM Non-Manufacturing Index, a leading indicator of economic conditions measuring activity in the services sector, Fri., May 3, 10:00 am, ET.
Although at a slightly slower pace, activity in the U.S. services sector is forecast to expand for another month with an index reading of 54.1 in April from 54.4 in March.