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The US dollar was hit and the euro surged as optimism eventually followed the Greek bailout announcement. The upcoming week features the long awaited appearances by Ben Bernanke, updated US GDP and the long awaited LTRO of the ECB (cash to eurobanks), among other events. Wednesday, February 29th, is of high importance. Will the picture around Greece change after European banks get more money? Here is an outlook for the major market moving events awaiting us.

Despite the strong sentiment, there are too many reasons to doubt the Greek deal: rapid approval of news measures by Greece, unknown IMF contribution and doubts by major players continue showing that a Greek bankruptcy at the end of March has greater chances. In the US, things are getting better, despite the rise in oil prices. Last week US jobless claims  continued improving  with a better than expected reading of 351K. This low-level steady-state  ensures a genuine recovery of the US labor market, with elevated job creation and ongoing decrease in unemployment rate.  Let’s start:

  1. US Pending Home Sales: Monday, 15:00. Pending home sales plunged 3.5% in December following a 7.3% surge in November. However this may be a temporary relapse since the labor market is getting stronger and mortgages are lenient suggesting further improvement in the housing sector. A rise of 1.1% is expected now.
  2. US Core Durable Goods Orders: Tuesday, 13:30.U.S. core durable goods orders increased considerably more than expected in December rising 2.1% after a 0.5% increase in the previous month. Economists expected a 0.9% gain. Meantime Durable Goods Orders  jumped 3.0% after a 4.3% increase in November. These figures contribute to GDP growth. Core durable goods orders are predicted to rise 0.3% while Durable goods orders are expected to fall 0.6%.
  3. US CB Consumer Confidence; Tuesday, 15:00. The Conference Board Consumer Confidence Index decreased unexpectedly in January to 64.8 after two big gains in November and December. However the survey participants were optimistic regarding labor market growth but less optimistic regarding business future conditions which could be attributed to the rise in energy prices. A further drop to 63.4 is predicted.
  4. ECB LTRO II:  The European Central Bank allots money to European banks in three year loans. The interest rate is low and the ECB accepts low grade bonds as collateral. This has two goals: encouraging banks to buy sovereign debt, pledge it as collateral, enjoy the arbitrage and lower yields for troubled countries such as Spain and Italy. The second goal is getting money for these troubled banks, especially in case they lose money on sovereign bonds of countries such as Greece. The first operation resulted in 489 billion euros of loans and is considered to have saved the banking system from a credit crunch. Estimations for the second operation vary from 200 billion to 1 trillion euros. A large sum means that banks are reliant on the ECB and that they are ready for a default of Greece. This event will be closely watched.
  5. US  GDP: Wednesday, 13:30. The US economy  grew less than predicted in the third quarter with a 2.0% rise in the July-to-September period. This increase was mainly due to a 2.3% rise in  consumer spending. Economists expected a 2.5% increase. However this reading is better than the 1.3% growth rate in the second quarter indicating a moderate recovery trend.  GDP is expected to expand 2.8% this time.
  6. Ben Bernanke speaks: Wednesday, 15:00. Ben Bernanke, head of the U.S. Federal Reserve, will testify before the Committee on Banking, Housing, and Urban Affairs at the U.S. Senate on the semi-annual monetary policy report. His remarks tend to cause volatility in the market.
  7.  US Unemployment Claims: Thursday, 13:30. jobless claims remained unchanged from last week with 351,000 initial claims. This low level suggests that the labor market is healing with an elevated job creation and declining unemployment.   In light of this improvement the U.S. Federal Reserve relinquished its plans for further monetary stimulus. A drop to 349,000 is forecasted.
  8. Ben Bernanke speaks: Thursday, 15:00. Ben Bernanke, head of the U.S. Federal Reserve, will testify before the Committee on Banking, Housing, and Urban Affairs at the U.S. Senate on the semi-annual monetary policy report. His remarks tend to cause volatility in the market.
  9. US ISM Manufacturing PMI: Thursday, 15:00. Manufacturing activity expanded at a slower pace than expected in January after a downward revision in December. January figures showed a rise of 1.0 points to 54.1 from53.1 in December. Economists expected a rise to 54.5. Nevertheless this is a positive reading above the 50 point line suggesting expansion.  A rise to 54.7 is predicted.
  10. Canadian GDP: Friday, 13:30.Canada’s economy contracted unexpectedly in November with a 0.1% decline following a flat reading in October. The main culprit behind this decline was lower energy output. Economists expected a 0.2% gain in November. This reading will badly affect the fourth quarter GDP figure. GDP is expected to increase 0.3% 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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