A busy week awaits forex traders with US Retail Sales, PPI, Unemployment Claims and Ben Bernanke’s speech, British CPI, German ZEW Economic Sentiment and many more. Let’s start our outlook on this week’s market movers.
Last week in the US, better-than-expected economic figures including employment data, raised questions about the necessity of the Fed’s second round of monetary easing. Kevin Warsh, one of the members of the Fed’s Washington-based board, argued last week that “policies should be altered if certain objectives are satisfied.” But the Fed’s own forecasts and underlying economic conditions suggest the bar is set exceedingly high for a policy reversal. Will the US market continue to improve raising the QE2 issue again?
- Japan‘s Preliminary GDP: Monday, 0:50. Japan’s economy expanded from a preliminary 0.1% to a revised 0.4% in April-June compared to the previous quarter. The rate climbed due to improvement in business investments. Last-minute boost from expiring stimulus contributed to Japan’s economic growth. A further rise of 0.6% is expected now.
- US Retail Sales: Monday, 14:30. Retail sales picked up 0.6 % in September mainly due to vehicle sales and electronic stores. The Core retail sales also gained 0.4% in line with economists’ expectations. October is expected to create a positive momentum for retail sales with the holiday shopping season. The retail sales is expected to climb by 0.7% and the Core retail sales is expected to preserve the same gain of 4.0%.
- British CPI: Tuesday, 10:30. Britain faces a raging inflation climbed by 3.1% for the third consecutive month while core CPI excluding the highly variable costs of food and energy products, climbed by 2.7%, above expectations for a rise of only 2.6%. This is the eighth month in a row that CPI is above its 2% target. It is likely that the same rate will be released now.
- German ZEW Economic Sentiment: Tuesday, 11:00. The ZEW German investor sentiment indicator declined more than expected in October, slipping to -7.2 from -4.3 in September with expectations of -7. The survey of 282 analysts and institutional investors found further improvement in the assessment of current conditions in September. The repeated decline of economic sentiment in October indicates that economic growth is likely to slow down in the following months. A small rise to -5.3 is expected now.
- US PPI: Tuesday, 14:30. The Producer Price Index for Finished Goods increased 0.4% in September. This increase followed a 0.4% rise in August. The rise in September is primarily due to higher prices for finished consumer foods. A bigger increase of 0.7% is expected now.
- American TIC Long-Term Purchases: Tuesday, 15:00. U.S. Treasury International Capital purchases rose unexpectedly in August to USD 128.7 billion after rising to USD 61.2 billion in July. Economists had expected purchases of long-term securities to decrease to USD 47.5 billion in August. Following the release of the data, the U.S. dollar was up against the euro. A drop to 100.3 is expected now.
- British Claimant Count Change: Wednesday, 10:30. British jobless claims rose by 5.3K in September compared to a revised 3.8K last month contrary to forecasts of a flat 0.0%. However, the claimant count rate remained unchanged at 4.5%, despite predictions for slight drop to 3.9. There was no market reaction to the gloomy figures indicating that Britain’s economy is in a fragile state awaiting further layoffs in the public sector. A smaller rise of 5.1K is forecasted this time.
- British MPC Meeting Minutes: Wednesday, 10:30. With a growing inflation problem on the one hand, and falling prices before Christmas on the other, Quantitative easing, could be a possibility to consider. However, Manufacturing activity picked up pace for the first time since March, which may helpe the MPC to ward off the QE issue for a few more days.
- US Building Permits: Wednesday, 14:30. The number of building permits issued in September was a seasonally adjusted 0.54 million, down from 0.57 million in August contrary to expectations of a rise to 0.58 million. A rise to 0.57 million is expected now.
- Unemployment Claims: Thursday, 14:30. The number of Americans filing jobless claims last week dropped drastically by 24,000 last week to 435,000 signaling a recovery in the U.S. labor market. This hopeful sign will not doubtable strengthen the USD. Nevertheless, a rise to 444K is expected now.
- US Philly Fed Manufacturing Index: Thursday, 16:00. Optimism among the region’s manufacturing executives improved notably in October when the Philadelphia Fed manufacturing index increased by 1.0 in from -0.7 in September, indicating expantion for the first time in three months. The new orders index improved to -5.0 from September’s -8.1, suggesting new orders contracted for a fourth consecutive month in October but at a slower pace. Employment expanded for a second month, with the employment index rising to 2.4 in October from 1.8 in September. A generous rise to 5.1 is expected now.
- Ben Bernanke speaks: Friday, 10:15. Federal Reserve Chairman Ben Bernanke will speak at the European Central Bank’s conference “Approaches to Monetary Policy Revisited – Lessons from the Crisis,” in Frankfurt where he is going to defend his QE2 decision. On November 6, Ben Bernanke said the central bank must focus on the U.S. rather than overseas economies when trying to spur the recovery by purchasing an additional $600 billion in Treasuries. Bernanke came under fire officials in Germany, China, and Brazil, who said his plan to pump cash into the banking system may jar other economies and fail to fuel U.S. growth. It will be interesting to see the effect of this speech in the markets.
That’s it for the major events this week. Stay tuned for coverage on specific currencies.
- For EUR/USD, check out the Euro/Dollar forecast.
- For the Japanese yen, read the USD/JPY forecast.
- For GBP/USD (cable), look into the British Pound forecast.
- For the Australian dollar (Aussie), check out the AUD forecast.
- For the New Zealand dollar (kiwi), read the NZD forecast.
- For USD/CAD (loonie), check out the Canadian dollar forecast.
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