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Trading Week Outlook: Jul. 11 - Jul. 15

|Includes: SPDR Dow Jones Industrial Average ETF (DIA), EEA, GBB, GOLD, JYN, UDN, USD
Jul. 9, 2011 ( – With significant improvement in the U.S. labor market nowhere to be seen, the week ahead will kick-start the Q2 2011 corporate earnings season and will bring a sequence of U.S. consumer spending, inflation and industrial activity data that could confirm the Fed’s concerns about the “frustratingly slow” pace of recovery in the world’s largest economy.

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- Bank of Japan Interest Rate Announcement, the main measure of inflation, Tues., Jul. 12, expected around 12:00 am, ET. 

Last quarter, the Japanese economy registered its third recession in a decade, which doesn’t seem like the appropriate environment for the Bank of Japan to consider changing its position as the last central bank in line to tighten monetary policy. Although the economy has shown signs of recovery following the devastating earthquake and tsunami, the Bank of Japan would be likely to keep the benchmark interest rate in its record low target band between 0% and 0.10% for longer.

2.    GBP- U.K. CPI- Consumer Price Index, the main measure of inflation preferred by the Bank of England, Tues., Jul. 12, 4:30 am, ET.

Rising inflation has proven not to be enough of a factor to prompt the Bank of England to hike rates in an environment of a slowing U.K. economy. Inflation in the U.K. is expected to remain stubbornly above the Bank of England’s 3.0% ceiling for another month with consumer prices forecast to increase by 4.5% y/y in June, same as the 4.5% y/y reading in May. The GBP could attract some bids ahead of the CPI report on expectations of rising inflationary pressures, but with the odds of a Bank of England rate hike in upcoming months significantly reduced, any pound rallies could be short-lived.
3.    USD- U.S. FOMC Meeting Minutes, a detailed record of the Fed’s last monetary policy meeting that may provide an outlook on the economy, inflation and the Fed’s future monetary policy, Tues., Jul. 12, 2:00 pm, ET.

The minutes from the Federal Open Market Committee’s latest meeting should serve as a reminder of the concerns about the “frustratingly slow” recovery and the Fed’s lack of urgency to exit its ultra-accommodative monetary policy, echoing the central bank’s commitment to keep rates “exceptionally low” for an “extended period”.
4.    CNY- China GDP- Gross Domestic Product, the main measure of economic activity and growth, Tues., Jul. 12, 10:00 pm, ET.

As the Chinese authorities scramble to keep inflation in check and to cool things off in the world’s fastest-growing economy, the Chinese GDP report could reflect the effects of their efforts with economic growth slowing a bit to 9.5% q/y from a previous reading of 9.7% q/y. 

5.    GBP- U.K. Jobless Claims and Unemployment Rate, the main gauges of employment trends and labor market conditions, Wed., Jul. 13, 4:30 am, ET.

Following the larger than expected increase of 19,600 in jobless claims for the month of April, the U.K. labor market is forecast to see a smaller increase of up to 15,100 new claims for unemployment benefits in May, while the unemployment rate remains unchanged at 7.7%.      

6.    EUR- Euro-zone HICP- Harmonized Index of Consumer Prices, the main measure of inflation, Thurs., Jul. 14, 5:00 am, ET.

The European Central Bank’s preferred inflation gauge is forecast to show inflationary pressures in the Euro-zone rising by 2.7% y/y in June, same as the 2.7% y/y reading in the previous month. With the European Central Bank’s anticipated July rate hike already in the rearview mirror, uncertainty, pessimism and fears that the EU debt crisis will spread, will continue to be the major risk factors for the euro. 

7.    USD- U.S. Retail Sales, an important gauge of consumer spending measuring the total receipts at retail establishments, Thurs., Jul. 14, 8:30 am, ET.

Consumer spending in the U.S. could see some improvement with retail sales forecast to recover from the 0.2% drop in May with a 0.3% m/m increase in June.

8.    USD- U.S. CPI- Consumer Price Index, the main measure of inflation in the world’s largest economy, Fri., Jul. 15, 8:30 am, ET.  

Consumer prices in the United States could remain subdued as the Core CPI (excluding food and energy costs) drops by 0.1% m/m in June from 0.2% m/m in May.

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

In the aftermath of the stronger-than-expected ISM manufacturing index, the U.S. industrial activity is expected to increase by 0.4% m/m in June from 0.1% in May. 

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., Jul. 15, 9:55 am, ET.   

The preliminary estimate of the U.S. consumer sentiment index is forecast to wrap up a “cautiously optimistic” U.S. economic data sequence with an increase to 72.5 in July from 71.5 in June.