Nov. 12, 2011 (Allthingsforex.com) – In case the market decides to pay attention not only to headlines from Italy and Greece but also to economic data, the week ahead will offer plenty of insights on inflation and economic conditions in some of the world’s largest economies.
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., Nov. 13, 6:50 pm, ET.
After registering its third recession in a decade and contracting by 0.9% q/q in Q1 and 0.5% q/q in Q2, the preliminary GDP estimate for the third quarter of 2011 is forecast to show the Japanese economy returning to growth by up to 1.5% q/q in Q3 2011. More upbeat GDP report and safe-haven flows should keep the yen supported in spite of the desire of the Japanese authorities to see their currency weaken.
2. GBP- U.K. CPI- Consumer Price Index, the main measure of inflation preferred by the Bank of England, Tues., Nov. 15, 4:30 am, ET.
The September spike in inflationary pressures to 5.2% y/y could be followed by a slight pullback to 5.1% y/y in October. Stubbornly high inflation, however, has not prevented the Bank of England from continuing its accommodative monetary policy and doing more quantitative easing.
3. EUR- Euro-zone GDP- Gross Domestic Product, the main measure of economic activity and growth, Tues., Nov. 15, 5:00 am, ET.
More signs of deteriorating conditions in the Euro-zone’s economy might come from the third quarter GDP estimate with forecasts pointing to only 0.2% q/q growth- same as the 0.2% q/q reading in Q2 2011. The GDP report will be released at the same time as the German ZEW economic sentiment index which is also expected to be weak with the index dropping to -52.1 in October from -48.3 in October.
4. USD- U.S. Retail Sales, an important gauge of consumer spending measuring the total receipts at retail establishments, Tues., Nov. 15, 8:30 am, ET.
A lot is riding on this report as consumer spending is a major part of the U.S. economy, but retail sales might not demonstrate a lot of strength with a smaller increase by 0.2% m/m in October from 1.1% in September. However, the slowdown could be temporary as sales at retail establishments would likely see a boost in the upcoming months due to the holiday shopping season.
5. JPY- Bank of Japan Interest Rate Announcement, Wed., Nov. 16, around 12:00 am, ET.
With the U.S. dollar slowly but surely erasing a big chunk of its post-intervention gains against the yen, it would be interesting to find out if the Bank of Japan is ready to stand against the tide of persistent yen strength. This is provided that they haven’t intervened by the time the meeting takes place, as another intervention remains a likely event.
6. GBP- U.K. Jobless Claims and Unemployment Rate, the main gauges of employment trends and labor market conditions, Wed., Nov. 16, 4:30 am, ET.
The U.K. employment data followed an hour later by the Bank of England inflation report could become a couple of back-to-back risk events for the pound. Forecasts point to an increase in the amount of jobless claims by up to 20,000 in October from 17,500 in September, while the unemployment rate inches higher to 8.2% from a previous reading of 8.1%.
7. EUR- Euro-zone HICP- Harmonized Index of Consumer Prices, the main measure of inflation, Wed., Nov. 16, 5:00 am, ET.
The European Central Bank’s preferred inflation gauge is forecast to stay unchanged at 3.0% y/y in October- same as the 3.0% y/y reading in September, but month-over-month the index is expected to pull back with a smaller 0.3% m/m increase in October from 0.8% in the previous month. Shifting monetary policy from maintaining price stability to pro-growth on the threat of a double dip in the economy could spell further ECB rate cuts.
8. GBP- Bank of England Inflation Report, the bank’s official assessment and outlook on inflation, Wed., Nov. 16, 5:30 am, ET.
As the latest PPI report showed inflationary pressures coming off their recent highs, if the Bank of England offers a dovish outlook on inflation, there will be no urgency for the bank to start tightening monetary policy anytime soon. Lower inflation expectations and risk aversion could lead to some unwinding of long GBP positions.
9. USD- U.S. CPI- Consumer Price Index, the main measure of inflation, Wed., Nov. 16, 8:30 am, ET.
Consumer prices in the United States could remain a non-issue for the Fed with forecasts expecting a flat 0% m/m reading in October from 0.3% m/m in September. Only a significant drop in unemployment and consistent improvement in the U.S. job and housing markets could change the Fed’s mind and its promise to keep rates “exceptionally low”. Until then, QE3 would not be completely out of the picture.
10. USD- U.S. Housing Starts, a leading indicator of housing market activity measuring construction of new residential properties, Thurs., Nov. 17, 8:30 am, ET.
Losing momentum after the jump to 658K in September, the U.S. housing starts are forecast to decline to 610K in October, while the building permits flatten in the 600K range.