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There has been no mercy for the US dollar, despite positive signs. How far can it fall despite growing Septaper speculation?  German ZEW Economic Sentiment, US retail sales, PPI, inflation data, and unemployment claims are the main forex movers for this week. Here is an outlook on the top events on our calendar.

Last week, Weekly jobless claims increased by 5,000 reaching 333K, but remained near a five-year low. However the US Dollar continued to weaken.  The job market is being closely monitored by the Federal Reserve, which is expected to taper its monthly $85 billion in bond purchases on its next meeting in September. Will the job market give a green light for the Fed to start QE tapering?  Let’s Start

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  1. US Federal Budget Balance: Monday, 18:00. The U.S. registered a $116.5 billion budget surplus in June, the biggest surplus since April 2008. The reading was better than the 42.1 billion surplus expected, indicating improvement in the deficit, dropping to 4.4% of GDP in the past four quarters from 8.0% in the previous four quarters. Economists believe the budget deficit will shrink this year to $642 billion, in case federal taxes and spending remain unchanged. This time a deficit of 90.3 billion is forecasted.
  2. UK Inflation data: Tuesday, 8:30. British inflation surged in June to the highest level in more than a year, reaching 2.9% after registering a 2.7% rise in May. However the increase was less than the 3.0% climb predicted by analysts. Due to the relatively high inflation, BOE board members voted against further QE activity at their July 3-4 policy meeting. Economists believe Mark Carney will provide long-term guidance in August to help recovery.  British inflation is expected to decline to 2.8%.
  3. Eurozone German ZEW Economic Sentiment: Tuesday, 9:00. German analyst and investor sentiment dropped unexpectedly in July, reaching 36.3 from 38.5 in June, contrary to predictions for a 39.6 climb. Analysts believe the slowdown in China was the major cause for this decline, endangering Germany’s export-driven  economy.  Investor’s climate is expected to reach 40.3 this time.
  4. US Retail sales: Tuesday, 12:30. Retail sales in the US increased by 0.4% in June, due to increased purchases of cars, trucks, furniture and clothes. However, excluding autos, gasoline and building supplies retail sales, rose a mere 0.15%, the slowest rise since January. However most economists anticipate a substantial improvement in household growth during the second half of 2013. Retail sales are predicted to climb 0.3% while Core sales are projected to edge up 0.4%.
  5. UK Employment data: Wednesday, 8:30. The UK employment market continued to improve in June with an unexpected fall in the number of Britons claiming unemployment benefits. The Office for National Statistics recorded a 21,200 drop in June compared to an 8,600 reduction in May, beating expectations for an 8,000 decline. This is another sign that Britain’s economic recovery is gaining momentum.  a further decline of 14,300 claims is expected now.
  6. US PPI: Wednesday, 12:30. Producer inflation increased 0.8% in June, following a 0.5% rise in May. The reading topped the consensus projection for a 0.5% gain. The core rate, excluding food and energy, increased to 0.2% after rising 0.1% in the previous month.  A rise of 0.4% is anticipated.
  7. US Inflation data: Thursday, 12:30. U.S. consumer prices advanced in June moving in close proximity to the Federal Reserve expectations. Consumer Price  Index increased 0.5% in June following a 0.1% gain in May, whole Core CPI remained unchanged at 0.2% in line with market expectations. Inflation is expected to pick-up in the second half of this year. Both CPI and core CPI are expected to advance 0.2% this time.
  8. US Unemployment Claims: Thursday, 12:30. The number of Americans filing initial claims for jobless benefits increased slightly to 333K last week but remained near a five-year low, an encouraging sign for the U.S. economy. Claims ticked up by 5000 from the previous week, better than the 336K forecasted by analysts.  A minor rise to 334K is anticipated now.
  9. US Philly Fed Manufacturing Index: Thursday, 14:00. Business conditions in the Philadelphia region edged up unexpectedly to 19.8 in July from a 12.5 reading in June. Economists expected a drop to 8.5.37% of companies experienced expansion in activity compared to 17% reported decreased activity. Job market conditions improved significantly in July, reaching 7.7, its first positive reading in four months.  A drop to 15.6  in sentiment  is expected  this time.
  10. US Building Permits: Friday, 12:30. U.S. permits for future home  construction  unexpectedly declined in June to a 911,000-unit pace following 990.000 in the previous month. Economists projected a rose to 1 million unit pace. However economists believe this is a temporary slowdown, since home builders’ sentiment is bullish.  An increase to 950,000 is expected.
  11. US Prelim UoM Consumer Sentiment: Friday, 13:55. Consumer confidence  unexpectedly declined in July, dropping to 83.9 from 84.1 in June, amid concerns about US economic outlook. The recent increases in mortgage rates may have caused this drop. However current conditions jumped to a six-year high as stock prices approached a record after falling in the middle of June. Consumer confidence is expected to reach  85.6 this time.

*All times are GMT.

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

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