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The US dollar and the Japanese yen eventually rallied on the re-election of Obama that eventually triggered a “risk off” reaction. Will worries about the fiscal cliff continue boosting the greenback? US retail sales, FOMC Meeting Minutes, Philly Fed Manufacturing Index and Ben Bernanke’s speech are the major events this week. Her is an outlook to the coming events.

Following President Obama’s reelection, the world’s current biggest concern is the US fiscal cliff, threatening global economy. Because of its size, its lack of options and the looming deadline, the Fiscal Cliff becomes the worlds’ No. 1 financial concern. In Europe, Greece’s looming payment is still seeking a last minute resolution. Will Greece indeed leave the euro-zone now that the US elections are behind us? This cannot be ruled out.

  1. UK inflation data: Tuesday, 9:30. U.K. yearly based inflation gauge increased by 2.2% in September, in line with market expectations, following 2.5% rise in August. Inflation rate remains above the BOE’s 2.0% target. Meanwhile Core CPI excluding energy, alcohol, and tobacco maintained a 2.1% reading. A further rise to 2.3% is expected this time.
  2. Eurozone German ZEW Economic Sentiment: Tuesday, 10:00. German economic sentiment continued to improve in October, though still in negative territory. The reading reached -11.5 from -18.2 in September. ECB’s offer to buy unlimited bonds has raised hopes among analysts though there is still a risk in some countries weighing on the eurozone. Another improvement to -10.1 is anticipated.
  3. US Federal Budget Balance: Tuesday, 19:00. The U.S. federal budget balance rose more-than-expected in September, reaching a seasonally adjusted 75.0 billion, from minus 191.0 billion in the preceding month. Economists expected a lower reading of 42.0 billion. A deficit of 126.2 billion is forecasted now. As with Europe, the “buy more time” approach is also see in the US regarding tackling the deficit.
  4. UK employment data: Wednesday, 9:30. The number of British citizens claiming unemployment benefits declined unexpectedly, by 4,000 in September following a massive decline of 14,200 in the preceding month lowering unemployment rate to 7.9% from 8.1% in August. These readings indicate a growth trend in the labor market. Another decline of 5,100 is expected now.
  5. US Retail sales: Wednesday, 13:30. US Retail sales increased more than expected in September rising 1.1% after a 1.2% increase in the previous month. The reading was above the 0.7% rise anticipated by analysts. Meanwhile Core sales also jumped 1.1% following a 1.0% rise in August going above the 0.6% climb predicted. The elevated readings show American consumer spending is improving with stronger auto sales and the release of the iPhone5. However economists predict a slowdown next year in case Congress fails to reach a budget deal to avoid sharp tax increases and spending cuts. Retail sales is expected to remain flat while core sales is predicted to rise 0.3%.
  6. US PPI  : Wednesday, 13:30. Producer prices increased more than expected in September rising 1.1% after a 1.7% gain in August. Economists expected a 0.8% increase. Despite the rise in prices, overall inflation is likely to be below the Federal Reserve’s 2.0% target. A small increase of 0.2% is expected.
  7. US FOMC Meeting Minutes: Wednesday, 19:00. The last FOMC meeting before Election 2012 did not bring novelty but kept things calm. Interest rate was maintained. However the FONC admitted inflation was picking up in the US but did not specify an action plan. The main messages of the FOMC’s meeting involved asset purchases and interest rates.
  8. US inflation data: Thursday, 13:30. Us inflation increased more than predicted in September rising 0.6% following the same increase in the preceding month. The rise was in light of higher gasoline prices. Meanwhile Core CPI, excluding food and energy, climbed a modest 0.1% after the same rise a month ago. The reading missed predictions of a 0.2 % rise. An increase of 0.1% is likely.
  9. US Unemployment Claims: Thursday, 13:30. The number of people filing initial claims for unemployment benefits last week dropped by 8,000 to a seasonally adjusted 355,000, could be a small sign of improvement, but more likely caused by Superstorm Sandy, disrupting unemployment office work. A rise of 362,000 is predicted this time.
  10. US Philly Fed Manufacturing Index: Thursday, 15:00. Manufacturing activity in the US stepped up in October reaching 5.1 after posting minus 1.9 the month before. This positive reading came after three months of contraction, but the indicators are still mixed raising uncertainty in the manufacturing sector. Further positive manufacturing  surveys are required in order to show a real improvement. A decline to 2.3 is expected now.
  11. Ben Bernanke speaks: Thursday, 18:20.  Ben Bernanke is due to speak at the HOPE Global Financial Dignity Summit, in Atlanta. He remarked at the FOMC meeting in October that the US economy is doing better than predicted, with increased household spending and continued investments by businesses in equipment and software but warned against possible downside risks in global financial markets.

*All times are GMT.

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

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