Forex Weekly Outlook – November 8-12

British inflation report, Canadian and American Trade Balance US Unemployment Claims, Federal Budget Balance and Consumer Sentiment are the highlight of this week. Here’s an outlook for the major market-moving events.

Federal Reserve Chairman  Ben S. Bernanke  announced the second QE on Nov 3, where Fed will buy extra $600 billion of treasuries to boost growth. This amount will be spent until the end of the second quarter, at a pace of $75 billion per month to further reduce long-term borrowing costs and keep prices from falling. Following Last week’s Mid-term Elections where Republicans reclaimed a majority in the House of Representatives,  Ben S. Bernanke  may have to renew his battle to preserve the central bank’s independence and monetary policy. Will the second QE strengthen the USD in the long run?  

1. British Inflation Report: Wednesday, 11:30. Mervyn King, Governor of the Bank of England, will have to admit his forecasts did not come true. Inflation next year will be substantially higher than predicted just three months ago, and growth will be notably slower. UK inflation expected to remain above 3% remained unchanged at 3.1% in August The recent decision to hike VAT to 20% next year by the coalition Government will also keep inflation higher. A bleak report will undoubtedly hurt the GBP.
2. Canadian Trade Balance: Wednesday, 14:30. Canada Trade Balance deficit narrowed to $1.3B, against expectations of -$2.2B. The main sectors behind the decline in imports were automotive products, industrial goods and materials. These declines were tempered by increases in imports of other consumer goods and energy products. A small increase to $1.4B is expected now.
3. American Trade Balance: Wednesday, 14:30. The  August Trade Balance  release showed a growing deficit of 46.35 billion; worse than the 43.5 billion predicted and the previous deficit of 42.8 billion. Deficit is expected to decrease to $44.8B.
4. US Unemployment Claims: Wednesday, 14:30. US jobless claims rise 20,000 last week to a seasonally adjusted 457,000 reversing the prior week’s decline. This reading is worse than 437K expected. The report came a day after the Federal Reserve announced it would buy an additional $600 billion worth government bonds by the middle of next year to spur the lackluster economic recovery and boost employment. The deadline to file for federal unemployment benefits expires on Nov. 30. If it is not continued, 800,000 people will stop getting checks within four days which will further increase the number of claims. A small drop to 451K is expected now.
5. US Federal Budget Balance: Wednesday, 20:00. A widening gap of 34.5 billion dollars higher than the 43.5B expected has accumulated due to tax cuts, spending on wars in Iraq and Afghanistan, entitlement programs, and financial bailouts. Despite the dreary situation it’s still better than the $1.42 trillion gap that made up 10.0 percent of GDP in fiscal year 2009. The Congressional Budget Office predicts an improvement by rising receipts and, lowering its TARP estimate. The CBO sees the gap in fiscal year 2011 at just over $900 billion in what would be an even bigger improvement from fiscal year 2010. A step towards balancing Federal budget was taken by Florida voters passing a nonbinding resolution calling for amendment in the U.S. Constitution to require a balanced budget without raising taxes.
6. Australian Employment data: Thursday, 01:30. Australian employment change rose for the seven consecutive months in September adding 49500 workers compared with a previous 30900 in August. Also Australian unemployment rate remained at 5.1% during September, inline with analysts’ expectations. Australian economy is expanding and increasing the AUD value. A smaller increase of 20.3K in jobs is expected with a small drop in unemployment rate to 5.0%.
7. G20 Meetings: Thursday-Friday. The fifth G20 Summit will take place on November 11 and 12, 2010 in Seoul, South Korea.  The leaders of the 20 top world economies will follow up on previous commitments, including safeguarding the recovery, ensuring strong and sustainable global growth, building a stronger international financial regulatory system, and modernizing world financial institutions.
   In its last meeting the G-20 failed to end currency wars. Despite a massive effort by the U.S. and some of its allies, the only thing the ministers could agree to was a vague, toothless promise to try to avoid currency wars. The meetings are expected to have limited impact on the market.
8. German Prelim GDP: Friday 12:00. The Bundesbank has raised its 2010 growth forecast for  Germany  after the country’s economy surged in the second quarter at the fastest pace in two decades. GDP climbed up by 2.2% in the second quarter thanks to exports and investment. A smaller rise of 0.8% in GDP is expected in light of these optimistic data.
9. American Preliminary UoM Consumer Sentiment: Friday, 15:55. The Thomson Reuters/University of Michigan preliminary US consumer sentiment index unexpectedly declined to 67.9 in October from 68.2 in September, suggesting US consumer confidence fell to the lowest level since July. Consumer spending typically accounts for about two-thirds of U.S. economic activity and is considered critical to the recovery. The following weeks before the U.S. holidays would be a key period for retailers which could boost this index. A rise to 69.2 is expected now.

* All times are GMT.

Further reading:

• 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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