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Trading Week Outlook: Jul. 25 - Jul. 29

|Includes: SPDR Dow Jones Industrial Average ETF (DIA), EEA, GBB, GOLD, JYN, UDN, USD
July 23, 2011 ( – With the EU summit and the new bailout package for Greece in the rearview mirror, the focus will shift to the U.S. debt ceiling debate and vote as the August 2 deadline approaches in a busy week ahead which is forecast to deliver another sequence of unimpressive economic data from 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.    GBP- U.K. GDP- Gross Domestic Product, the main measure of economic activity and growth, Tues., Jul. 26, 4:30 am, ET.

The 0.5% q/q contraction in the U.K. economy in the fourth quarter of 2010 was followed by 0.5% q/q expansion in Q1, but the consensus forecasts are pointing to a much slower 0.1% q/q growth in the second quarter of 2011. Anemic U.K. economic growth could raise the odds that the Bank of England would be in no hurry to hike rates in the near future- a factor that could continue to weigh on the GBP.

2.    USD- U.S. New Home Sales, an important gauge of housing market conditions measuring sales of newly-constructed homes, Tues., Jul. 26, 10:00 am, ET.

Following the weaker-than-expected existing home sales, the sales of new homes in the U.S. could see a small increase to 321K in June from 319K in May, although some less optimistic forecasts expect the new home sales to remain flat in June.

3.    AUD- Australia CPI- Consumer Price Index, the main measure of inflation, Tues., Jul. 26, 9:30 pm, ET. 

Westpac Banking Co. recently became the first one of the large Australian banks to forecast a Reserve Bank of Australia rate cut by the end of 2011. Subsiding inflationary pressures in Australia would be supportive of Westpac’s expectations as consumer prices register a smaller increase by 0.7% in the second quarter from 1.6% in Q1 2011.   

4.    USD- U.S. Durable Goods Orders, a leading indicator of economic activity measuring durable goods orders placed with domestic manufacturers, Wed., Jul. 27, 8:30 am, ET.

After the 2.1% m/m increase in May, the U.S. orders for durable goods are expected to pull back with a reading of 0.5% m/m in June.

5.    NZD- Reserve Bank of New Zealand Interest Rate Announcement, Wed., Jul. 27, 5:00 pm, ET.

Although the Reserve Bank of New Zealand is not expected to raise rate at this meeting, the market could continue to price a Reserve Bank of New Zealand rate hike by the end of the year if the central bank leaves the door open to future monetary policy tightening on rising inflation and stronger economy. On the other hand, the Reserve Bank of New Zealand may express concerns about the negative impact on exports from the unstoppable rally and record highs of the New Zealand dollar.  

6.    USD- U.S. Pending Home Sales, a leading indicator of housing market activity measuring the amount of homes under contract to be sold, Thurs., Jul. 28, 10:00 am, ET.

This could be another weak housing market report with the pending home sales index forecast to drop by up to 1.0% m/m in June, compared with the 8.2% m/m increase in May.    

7.    JPY- Japan CPI- Consumer Price Index, the main measure of inflation, Thurs., Jul. 28, 7:30 pm, ET.

Inflationary pressures in Japan are forecast to stay above zero with a smaller increase by 0.5% m/m in June from 0.6% m/m in May.   

8.    EUR- Euro-zone Flash HICP- Harmonized Index of Consumer Prices, the main measure of inflation, Fri., Jul. 29, 5:00 am, ET. 

The preliminary flash estimate of the European Central Bank’s preferred inflation gauge is forecast to show consumer prices remaining above the 2% comfort level; rising by 2.7% y/y in July, same as the 2.7% y/y reading in June.

9.    USD- U.S. GDP- Gross Domestic Product, the main measure of economic activity and growth in the world’s largest economy, Fri., Jul. 29, 8:30 am, ET.   

The main spotlight event of the week will bring the Q2 2011 preliminary estimate which is expected to show the U.S. economic growth slowing to 1.6% q/q in the second quarter, compared with 1.9% q/q in Q1 2011. A sequence of weak U.S. economic data throughout the week could confirm the Fed’s concerns about the “frustratingly slow” pace of recovery. 

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. 29, 9:55 am, ET.

The U.S. consumer sentiment index could see an upward revision with a small increase to 64.1, compared with the preliminary estimate of 63.8 for the month of July.