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A dramatic week with a dramatic ending sent the dollar to levels unseen for many months. Will this continue? US retail sales; PPI, inflation rate Unemployment rate and consumer sentiment are the main market-movers this week. Here are the main events awaiting us ahead.

Last week Jean-Claude Trichet has announced at the last ECB press conference that the rate will remain 1.50% with no intention on executing rate cuts, but with much lower growth and inflation forecasts. He criticized governments for “benign neglect” of commitments and urged them to act on deficits. His speech started the avalanche in EUR/USD .

The dramatic downfall of the euro followed another dramatic event: the huge intervention of the Swiss authorities in the value of the franc. By putting a floor under EUR/CHF at 1.20, also USD/CHF leaped and EUR/USD felt this as well.

  1. UK inflation data: Tuesday, 8:30. Consumer Prices Index increased in July reaching 4.4% from 4.2% in June due to increases in clothing, shoes and fees for financial services. The Bank of England expects inflation to return to its target level in the next two years. A small rise to 4.5% is predicted.
  2. US Federal Budget Balance: Tuesday, 18:00.  The government’s deficit widened to $129.4 billion in July from $43.1 billion in the previous month but lower than the $137.4 billion predicted. This is also an improvement on a yearly base after reaching deficit of 165.0 billion in July last year. A further contraction to -$126.5 billion is forecasted.
  3. UK employment data: Wednesday, 8:30.Britain’s job market looks grim with 37,100 more unemployment claims in July from31,300 in the previous month and above expectations for 20,100 new claims. However this drastic rise was primarily caused by people changing their status from inactive to unemployed.  Another tough month for the job market is expected with 34,600 new unemployed people.
  4. US retail sales: Wednesday, 12:30. Retail sales and Core sales increased by 0.5% in July gaining more than expected. Uncertainty in the Job market and general concern of an economic slowdown prevents these figures from jumping further up. A smaller gain of 0.2%is predicted now.
  5. US PPI: Wednesday, 12:30. Prices of finished goods increased by 0.6% in July amid a drop of 0.6% in energy prices Core PPI, which excludes food and energy, rose by 0.4%.A decrease of  0.1% is expected.
  6.  NZ rate decision: Wednesday, 21:00. The Reserve Bank of New Zealand left the  official cash rate unchanged at 2.50% in July. RBNZ Governor Allan Bollard noted that the economy is expanding at a better than expected pace however, current concerns over global financial markets pose downside risk. No change is expected.
  7. Switzerland Rate decision: Thursday, 12:00. The Swiss central bank decreased interest rates  close to zero from 0.25% despite talks of an increase. The Swiss franc, a safe currency in times of turmoil, has weakened in the dramatic move by the Swiss authorities in the past week, by putting a floor under EUR/CHF, at 1.20. They will have their chance to clarify their position and perhaps hint further moves. The same rate is predicted now.
  8. US inflation data: Thursday, 12:30.US inflation for July 2011 gained 0.5% while Core CPI without food and energy increased by 0.2% during July. The recent decline in  crude oil prices  moderated inflation rates  in August. Another gain of 0.2% is forecasted.
  9. US unemployment claims: Thursday, 12:30. Claims forU.S. unemployment benefits increased last week rising by 2,000 to 414,000 amid predictions for a decrease of new claims to 405,000. This increase indicates the job market continues its unsteady path to recovery with an increasing number of dismissals by employers fearing further decrease in consumer spending. A drop to 410,000 is expected now.
  10. US Philly Fed Manufacturing Index: Thursday, 14:00. Manufacturing activity in the U.S. Mid-Atlantic region dropped to a nearly 2-1/2 year low in August to -30.7 the lowest level since 2009 from3.2 in July, indicating bumpy road to recovery. However analysts claim things are not so bad claiming the poor reading on the time the survey was conducted overlapping a week of unusually high volatility in both domestic and international financial markets. An improvement to-14.4 is forecasted.
  11. US TIC Long-Term Purchases: Friday, 13:00. Foreign purchases of long-term securities reached $3.7 billion in June much lower than the $30.4 billion and the $24.2 billion in the previous month. A climb to $27.3 billion is expected.
  12. US UoM Consumer Sentiment: Friday, 13:55.U.S. consumer sentiment plunged in August reaching 55.7 from63.7 in July. This reading was much lower than the 63.2 anticipated reflecting uncertainties of Americans regarding domestic and global economic conditions. Another increase to 56.2 is forecasted.

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

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