Aug. 12, 2012 (Allthingsforex.com) - Economic conditions on both sides of the Atlantic and how they will influence the future monetary policies of major central banks will be the main themes in the busy week ahead as the markets eye important economic reports from some of the world's largest economies.
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- Japan GDP- Gross Domestic Product, the main measure of economic activity and growth, Sun., Aug. 12, 7:50 pm, ET.
After picking up by 1.2% q/q in the first quarter of 2012, the Japanese economy is forecast to slow to 0.6% q/q in Q2- half the amount of growth in the previous quarter. With the Bank of Japan sitting on the sidelines in August, a weak GDP data would increase the probability of more easing as early as the bank's September meeting and could weigh on the Japanese yen.
2. GBP- U.K. CPI- Consumer Price Index, the main measure of inflation preferred by the Bank of England, Tues., Aug. 14, 4:30 am, ET.
Inflationary pressures in the U.K. are forecast to continue their descent with another decline to 2.3% y/y in July from 2.4% y/y in June. Lower inflation will not be an obstacle in case the Bank of England sees the need for further easing in upcoming months and the report could become the first of three risk events for the GBP in the week ahead.
3. EUR- Euro-zone GDP- Gross Domestic Product, the main measure of economic activity and growth, Tues., Aug. 14, 5:00 am, ET.
Stronger German growth in the first quarter lifted the overall Euro-zone GDP reading to 0% q/q, contrary to the forecasts for 0.2% q/q decline. However, in the second quarter of 2012, the Euro-zone economy is not expected to "dodge the bullet" once again and is forecast to contract by 0.2% q/q. The deteriorating economic backdrop in the euro-area could see pressures mounting on the single currency on raised odds that the European Central Bank might not have any other choice but to consider additional measures to stimulate the economy and bring down borrowing costs.
4. USD- U.S. Retail Sales, an important gauge of consumer spending measuring sales at retail establishments, Tues., Aug. 14, 8:30 am, ET.
Consumer spending in the U.S. is expected to improve with retail sales rising by 0.3% m/m in July following a 0.5% m/m decline in June. Stronger U.S. economic data in the weeks leading to the Fed's monetary policy announcement on September 13 should be able to help the USD on reduced QE3 odds.
5. GBP- U.K. Jobless Claims and Unemployment Rate, the main measures of labor market conditions, Wed., Aug. 15, 4:30 am, ET.
Another potential risk event for the GBP could show weakness in the U.K. labor market with jobless claims rising by 6,300 in July, compared with 6,100 in June and the unemployment rate remaining at 8.1%.
6. USD- U.S. CPI- Consumer Price Index, the main measure of inflation, Wed., Aug. 15, 8:30 am, ET.
The inflation gauge in the world's largest economy is forecast to rise by 0.2% m/m in July from 0% m/m in June, but should stay at the 1.7% y/y level. The small monthly increase will not be a significant enough factor to steer the Fed away from considering additional monetary policy easing.
7. GBP- U.K. Retail Sales, an important gauge of consumer spending measuring sales at retail establishments, Thurs., Aug. 16, 4:30 am, ET.
The third report in the weekly sequence of notable U.K. economic data will not be able to instill optimism in the state of the economy with retail sales forecast to stay flat at 0% m/m in July, compared with the minimal 0.1% m/m increase in June.
8. EUR- Euro-zone HICP- Harmonized Index of Consumer Prices, the main measure of inflation preferred by the European Central Bank, Thurs., Aug. 16, 5:00 am, ET.
The world's most industrialized nations have seen inflationary pressures subsiding in recent months and the Euro-zone is not expected to be an exception. The inflation gauge is forecast to stay at 2.4% y/y in July, same as the 2.4% y/y reading in June.
9. USD- U.S. Housing Starts, a leading indicator of housing market activity, and Jobless Claims, an important gauge of labor market conditions measuring first-time claims for unemployment benefits, Thurs., Aug. 16, 8:30 am, ET.
The consensus forecasts point to a slight increase to 365K from 361K in the weekly claims for unemployment benefits. However, with a five-week average around 365K, the U.S. jobless claims are signaling improvement in labor market conditions and, if this trend continues, it could reduce the probability of a QE3 announcement by the Fed in September.
Contrary to the promising jobless claims data, the U.S. housing starts would be likely to remain unimpressive with a pullback to 758K in July, compared with 760K in June.
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., Aug. 17, 9:55 am, ET.
The outlook of U.S. consumers is forecast to get slightly better with a preliminary sentiment index reading of 72.5 in August from 72.3 in July.