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After being pressured for some time, the US dollar made a huge comeback, with USD/JPY finally breaking the 100 level. Will this continue? The recent moves added a lot of excitement. US Retail sales, German ZEW Economic Sentiment as well as US Inflation and employment data are the main market movers. Here is an outlook on the key events awaiting us this week.

Last week the number of jobless claims dropped to new lows reaching 323K, following a revised 327K in the previous week. The result beat  market expectations for a  333k  reading. This was one of the triggers that began the dollar’s huge move. Apart from the yen, also the Aussie suffered and reached parity with the dollar. Other currencies were also retreating. Fasten your seat belts, there’s probably more turbulence. The euro also retreated, despite some signs of German strength. Where is EUR/USD heading?  Let’s Start

  1. US retail sales: Monday, 13:30. US Retail sales were weak in March dropping 0.4%. The reading was below the estimates for a flat reading. The decline came after a surge of 1.0% in the preceding month. Excluding auto trades, retail sales declined 0.4%, following a 1.0% climb in February. Analysts expected a smaller drop of 0.1%. Higher payroll taxes and unusually cold weather in March may have caused these declines. Both Retail sales and Core sales are expected to drop 0.2%.
  2. German ZEW Economic Sentiment: Tuesday, 10:00. German economist and investor climate plunged sharply in April, falling to 36.3 points from 48.5 in March, amid renewed fears of a further deterioration in the euro zone debt crisis and a global slowdown induced by China. A rise to 40.7 is expected now.
  3. UK employment data: Wednesday, 9:30. There was a pleasant surprise for the UK labor market, led by an unexpected fall in the number of Britons claiming unemployment benefits in March. The number of unemployed declined by 7,000, while analysts expected no change. The reading baffled analysts, expecting a worsening in the labor market due to the UK’s stagnant production. A further decline of  3,100 jobs is forecasted.
  4. US PPI: Wednesday, 13:30. Producer Price Index disappointed in March with a 0.6% decline after a robust rise of 0.7% in February. The reading was weaker than the 0.2% fall projected by analysts. Food prices increased 0.8% while energy costs dropped 3.4%. On a yearly bases, the year-ago rate eased to 1.1% from 1.8% in February. Another decline of 0.6% is predicted.
  5. US Building Permits: Thursday, 13:30. US Building permits dropped in March by 3.9% to an annual pace of 0.902 million units, following 939,000 in February. Market predictions were for 0.942 million units for February permits. However housing starts were unexpectedly strong in March, soaring 7.0% after a 7.3% gain the month before. An increase to 0.94 million units is estimated. The rise in pending home sales provided optimism for the sector.
  6. US inflation data: Thursday, 13:30. US Core Consumer prices, excluding the volatile energy and food components, increased modestly by 0.1%, after advancing 0.2% in February. Meanwhile, Consumer prices declined in March for the first time in four months, amid disappointing drop in factory output, backing the Federal Reserve opinion to maintain its monetary stimulus to boost economic growth. CPI is expected to gain 0.2% while core CPI is predicted to decline 0.2%.
  7. US Unemployment Claims: Thursday, 13:30. The number of Americans filing initial claims for unemployment benefits fell last week to its lowest level in almost 5-1/2 years, reaching 323,000 claims last week, down 4,000 claims from the week before, beating expectations for a 333,000 reading. This was the third consecutive decline which goes in line with the steady improvement in hiring.
  8. US Philly Fed Manufacturing Index: Thursday, 15:00. Factory activity in the U.S. Philadelphia area unexpectedly plunged to 1.3 in April from a 2.0 reading in the month before.  The reading missed predictions for 2.7 points. Nevertheless, it was above 0, indicating expansion. A rise to 332,000 is forecasted.
  9. US UoM Consumer Sentiment: Friday, 14:55. Consumer climate plunged to a nine-month low in April reaching 72.3, following 78.6 in the previous month. The main decline occurred in the long-term outlook, fearing higher unemployment rate and lower after-tax income in the year ahead. An improvement to 77.9 is expected this time.  
  10. Ben Bernanke speaks: Saturday, 16:00. Federal Reserve Chairman Ben Bernanke will speak in New York. He may speak of the latest improvement in the US job market. His words will cause volatility in markets. The Fed recently left policy unchanged and pointed a figure towards politicians.

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

*All times are GMT.

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