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A week of optimism left the dollar and the yen much lower. Will this continue? Or was it just a temporary correction? German ZEW Economic Sentiment, Ben Bernanke’s speech and US employment claims are a few of the market movers awaiting us this week. Here is an outlook on the major events.

Despite downgrades for countries and banks, fresh worries from Portugal and high uncertainty from Greece, the final approval of the EFSF and the promise that “a solution is on the way” boosted not only the euro but all risk currencies. Is an orderly Greek default coming at the beginning of November? It seems more and more likely.  Let’s start

  1. UK inflation data: Tuesday, 8:30.UK inflation climbed to 4.5% in August from 4.4% in the previous month due to higher transport costs, and clothing. In light of this reading BOE £200bn quantitative easing program is likely to increase. A further increase to 4.9% is predicted now.
  2. Euro-Zone German ZEW Economic Sentiment: Tuesday, 9:00.Germany’s economic sentiment continued to decline in September reaching -43.3 from -37.6 in the previous month.  Analysts expected the reading to drop to -45. This slide reflects the reoccurring crisis in Europe. Another decrease to -44.7 is expected.
  3. US PPI: Tuesday, 12:30. Producer prices were flat in August despite the rise in food prices and following 0.2% gain in July. Economists predicted PPI to decline by 0.1%.  Meanwhile core PPI excluding food and energy gained 0.1% from 0.4% increase in July indicating inflation is slowing down. PPI is expected to increase by 0.2% as well as core PPI.
  4. US TIC Long-Term Purchases: Tuesday, 13:00. U.S. TIC long term purchases increased below expectations in July reaching 9.5 billion from 3.4 billion in the previous month. Economists forecasted an increase of 27.3 billion. A rise to 27.8 billion is forecasted.
  5. Ben Bernanke speaks: Tuesday, 17:15. Ben Bernanke head of the Federal Reserve is scheduled to speak at the Federal Reserve Bank’s 56th Economic Conference, in Boston. His speeches cause high volatility in the market.
  6. US Building Permits: Wednesday, 12:30. The number of building permits increased to 630.000 in August from the 597.000 registered in July, according to data released by the US Census Bureau. The result is higher than market consensus of 600.000. A small decline to 620,000 is predicted now.
  7. US inflation data: Wednesday, 12:30.US inflation rate continued to climb rising by 0.4% in August after 0.5% jump nut the Core CPI excluding food and energy increased by 0.2% in line with predictions and the same as in the previous month indicating a healthy inflation rate with will make it hard for the FOMC members to plead for another round of QE. Core CPI is expected to increase by 0.2% while CPI  is predicted to grow by 0.4%.
  8. US Unemployment Claims: Thursday, 12:30.  Initial claims for unemployment in the US dropped by a mere 1000 claims to 404,000 after seasonal adjustment. Economists expected a higher figure of 406,000 pointing to a possible improvement in the employment market. A small increase to 408,000 is predicted.
  9. US Existing Home Sales: Thursday, 14:00. A nice climb in sales of second hand homes despite tight credit and appraisal problems sales reached 5.03 million units in August from 4.67 million in the previous month. Economists predicted a much lower figure of 4.75 million units. existing home sales are at their highest level since March and are up 18.6 percent compared to August of 2010. A decline to 4.95 million is expected now.
  10. US Philly Fed Manufacturing Index: Thursday, 14:00. Manufacturing activity in the mid-Atlantic region dropped further but slower in September reaching -17.5 from-30.7 in the previous month. This reading was lower than the -14.7 predicted. However employment got stronger in September moderating decline. Another more moderate decline of 8.7 is forecasted.
  11. Euro-Zone German Ifo Business Climate: Friday, 9:00. German business confidence dropped less than expected in September reaching 107.5 after108.7 in the previous month offering hope for Europe’s largest economy in resisting the European debt crisis. A drop to 106.3 is predicted.
  12. Canadian inflation data: Friday, 11:00. Core consumer price inflation inCanada excluding volatile components, increased more-than-expected in August gaining 0.4% after 0.2% increase in the previous month. This increase was well above predictions of 0.1% climb. Core CPI is expected to grow by  0.3% while CPI  is predicted to increase by 0.1%.

That’s it for the major events this week. Stay tuned for coverage on specific currencies

*All times are GMT.

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