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Trading Week Outlook: Mar. 12 - Mar. 16

Mar. 11, 2012 ( - With five monetary policy decisions by major central banks in the rearview mirror, in the week ahead all eyes will turn to the Federal Open Market Committee meeting as traders eagerly await the next move by the Fed.

In preparation for the new trading week, here is a list of the Top 10 spotlight economic events that will move the markets around the globe.

1. JPY- Bank of Japan Interest Rate Announcement, Mon., Mar. 12, around 11:00 pm, ET.

The recent expansion of the Bank of Japan's quantitative easing program along with the talk of a 1% inflation target have been two effective tools in the central bank's campaign to weaken the yen. The Bank of Japan is expected to maintain its accommodative monetary policy stance and to stay the course, keeping its record low benchmark rate in the target band between 0% and 0.10%.

2. EUR- Euro-zone ZEW Economic Sentiment Index, a leading indicator of economic conditions and business expectations, Tues., Mar. 13, 5:00 am, ET.

The trend of improvement in the economic outlook is forecast to continue with the ZEW economic sentiment index in the Euro-zone turning positive with a reading of 3.8 in February from -8.1 in January.

3. USD- U.S. Retail Sales, an important gauge of consumer spending measuring sales at retail establishments, Tues., Mar. 13, 8:30 am, ET.

Consumer spending is expected to pick up the pace in February with retail sales rising by 1.1% m/m, compared with 0.4% in the previous month.

4. USD- U.S. FOMC Interest Rate Announcement, Tues., Mar. 13, 2:15 pm, ET.

In his latest testimony, Fed Chairman Bernanke was surprisingly hawkish, telling Congress that, "while keeping monetary stimulus is warranted, rising gasoline prices are likely to push up inflation temporarily and the drop in the unemployment rate has been more rapid than expected". If this is the view shared by the majority of the Federal Open Market Committee policy makers, the Fed might steer further away from doing more quantitative easing. That, of course, doesn't mean that QE3 is completely out of the picture and the Fed will be ready to deploy it if economic conditions deteriorate. For the time being, expect the Fed to reiterate its commitment to maintain rates low until late 2014, while keeping the QE3 door open if the central bank finds it necessary to do more quantitative easing in the second half of 2012. The USD could attract bids on reduced QE3 odds, at least in the near term.

5. GBP- U.K. Jobless Claims and Unemployment Rate, the main gauges of employment trends and labor market conditions, Wed., Mar. 14, 5:30 am, ET.

Unexpectedly doubling last month, first-time claims for unemployment benefits in the U.K. are forecast to increase by another 7,000, while the unemployment rate remains unchanged at 8.4%. A weak employment report could have a negative impact on the GBP, especially if it is coupled with a risk-averse market environment.

6. EUR- Euro-zone HICP- Harmonized Index of Consumer Prices, the main measure of inflation preferred by the European Central Bank, Wed., Mar. 14, 6:00 am, ET.

Creeping higher in recent months, inflation is back on the radar screen of the European Central Bank which may not stay too accommodative if the inflation index continues to rise. Consumer prices in the Euro-zone are forecast to inch higher to 2.7% y/y in February. On the other hand, a pullback in inflationary pressures would create a more comfortable environment for ECB policy makers to consider additional rate cuts if economic conditions deteriorate or if the debt crisis escalades.

7. CHF- Swiss National Bank Interest Rate Announcement, Thurs., Mar. 15, 3:30 am, ET.

With the euro lingering near the Swiss National Bank's floor at 1.20 and incapable of strengthening on its own against the franc, it would not be surprising to see the Swiss central bank reassuring the markets of its commitment to do whatever is necessary to enforce the franc's exchange rate cap in its efforts to protect the economy. Despite of the leadership shake up, things at the SNB are getting back to normal with an official appointment of a permanent Chairman and a third member of the central bank's council scheduled in April. We could see some unwinding of CHF long positions when traders begin to reduce their franc exposure on expectations of more SNB action to weaken its currency.

8. USD- U.S. Jobless Claims, an important gauge of labor market conditions measuring claims for unemployment benefits, Thurs., Mar. 15, 8:30 am, ET.

After several impressive weeks of decline, the jobless claims spiked up to 362K last week and are expected to continue to rise up to 375K for another week. The trend of recovery in the U.S. labor market should continue, as long as jobless claims stay below 375K- the number which economists estimate could signal a consistent improvement in labor market conditions and further decline in the unemployment rate.

9. USD- U.S. CPI- Consumer Price Index, the main measure of inflation in the world's largest economy, Fri., Mar. 16, 8:30 am, ET.

In line with the Fed Chairman's outlook that "rising gasoline prices are likely to push up inflation temporarily" the U.S. consumer price index is forecast to jump by 0.4% m/m in February from 0.2% m/m in January. Higher inflationary pressures create an environment where more quantitative easing would not be the preferred choice of monetary policy by the Fed and should keep QE3 odds reduced.

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., Mar. 16, 9:55 am, ET.

The outlook of U.S. consumers could see a slight improvement with a preliminary sentiment index reading of 75.7 in March compared with 75.3 in the previous month.