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The US dollar had to retreat from its rise after weak employment figures left uncertainty about QE tapering. US Unemployment Claims, Retail sales, PPI and  Consumer Sentiment are the highlights of this week. Check out  these events and more, on our weekly outlook.

Last week, US Non-Farm Payrolls disappointed with only 169K as employers hired fewer workers than expected in August. The unemployment rate hit a 4-1/2-year low of 7.3% amid a plunge in labor participation rate, reaching its lowest level since the 1970’s. In light of this worrisome release, Everything already seemed set for tapering according to other good data. What will the Fed do? Let’s Start

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  1. US JOLTS Job Openings: Tuesday, 14:00. This is one of Bernanke’s favorite indicators and could also add to the September 18th decision about tapering. JOLTS reached 3.94 million in June, and they are expected to edge up to 3.96 in July. Despite being a lagging indicator, it is of importance. Also note the potential impact of an escalation in Syria.
  2. UK employment data: Wednesday, 8:30. The number of people claiming unemployment benefits continued to drop in July to a four year low, declining by 29,200 after a 29,400 plunge in the prior month, nearly doubling market predictions. Furthermore, the number of people employed increased by 69,000 in the quarter to 29.78 million, the highest since records began in 1971 but unemployment rate remained 7.8%. The Bank of England’s new governor Mark Carney is closely monitoring the employment situation before examining the possibility of a rate hike. UK job market is expected to continue its improvement with a 21,200 fall in the number of unemployed.
  3. NZ rate decision: Wednesday, 21:00. The Reserve Bank has maintained the Official Cash Rate (OCR) at 2.5%, as projected, promising to keep rates unchanged through the end of 2013. The central bank warned about the sharp rise in house price inflation in Auckland and Christchurch saying they will monitor its effect on the wider economy. The RBNZ projects a rate hike in March 2014.No change in rates is expected now.
  4. Australian employment data: Thursday, 1:30. Australian job market contracted by 10,200 in July, following a 9,300 addition in the previous month. This fall missed predictions for a 6,200 increase. Full-time jobs dropped 6,700 to 8,133,900 in the month while part- time jobs decreased 3,500 to 3,519,300. However unemployment rate remained steady at 5.7% despite the job loss and a 5,700 decline in the number of unemployed. In case the slowdown proceeds, the RBA will have to consider further easing measures to boost the economy. Australian labor market is expected to add 10,200 people and unemployment rate is expected to rise to 5.8%.
  5. US Unemployment Claims: Thursday, 12:30. The number of Americans expected applying for unemployment benefits dropped by 9,000 last week to 323,000, indicating the job market is strengthening hand in hand with hiring. This improvement will lead to better wages and help sustain consumer spending, which accounts for about 70% of the economy. Economists expected a higher figure of 332,000. An increase of 332,000 is expected.
  6. US Federal Budget Balance: Thursday, 18:00. The US Government increased its budget deficit by $98 billion in July, despite an increase in tax revenues. Healthcare programs, pensions for the elderly and the military drove deficit up. Analysts expected deficit of $96 billion. Even though deficit continues to rise this year, it seems on track to narrow substantially. Deficit  is expected to increase to $155.3 billion.
  7. US Retail sales: Friday, 12:30. U.S.  retail  sales increased by 0.2% in July, following a 0.6% advance in the previous month, suggesting a pick-up in consumer spending. Small businesses were more optimistic in July, despite low inventories. Meanwhile Core sales, excluding automobiles gasoline and building materials jumped 0.5%, posting the largest gain inn five months, indicating households are spending more as the US job market continues to improve. Many economists expect the Fed to begin tapering its purchases as soon as September in light of the strong economic data recently published. US retail sales are expected to gain 0.5%, while core sales are predicted to rise 0.3%.
  8. US PPI: Friday, 12:30. U.S. producer prices were flat in July, after a 0.8% rise in the previous month, adding concern that inflation is running too low. Economists expected PPI to advance 0.4%. Meanwhile, Core prices, which are seen as indicators of trends in inflation, rose 0.1% during the month, below the 0.2% gain expected by analysts. Low inflation does not correlate with the strong data released and is a worrisome topic for the Fed before deciding on tapering economic stimulus. A rise of 0.2% is anticipated now.
  9. US UoM Consumer Sentiment: Friday, 13:55. The preliminary reading of the UoM Consumer Sentiment Index for August showed an unexpected decline of 5.1 points to 80, while analysts expected the index to reach 85.6. This indicator is highly regarded by the Fed for its economic outlook evaluation. A rose to 82.6 is forecast.

*All times are GMT.

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

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