Apr. 15, 2013 (Allthingsforex.com) – The G20 meeting and notable economic data from Japan will place the yen in the center of the market’s attention as “currency wars” once again becomes a hot topic for discussion in the week ahead.
In preparation for the new trading week, here is the outlook for the Top 10 spotlight economic events that will move the markets around the globe.
1. CNY- China GDP- Gross Domestic Product, the main measure of economic activity and growth, Sun., Apr. 14, 10:00 pm, ET.
The world’s second-largest economy was expected to hum right along with 8.0% q/y expansion in the first quarter of 2013, after growing by 7.9% q/y in the final quarter of last year. However, the GDP report disappointed with slower pace of growth by 7.7% q/y in Q1 2013. The weak Chinese data brought down commodity prices and dragged lower the higher-yielding commodity currencies, the AUD and NZD.
2. GBP- U.K. CPI- Consumer Price Index, the main measure of inflation preferred by the Bank of England, Tues., Apr. 16, 4:30 am, ET.
Inflationary pressures in the U.K. are forecast to remain at 2.8% y/y in March, same as the 2.8% y/y reading in the previous month. If the threat of a triple-dip recession in the U.K. materializes, inflation will not be an obstacle for the Bank of England to ease monetary policy further in upcoming months.
3. EUR- Euro-zone ZEW Economic Sentiment Index, a leading indicator of economic conditions measuring the outlook of financial experts, Tues., Apr. 16, 5:00 am, ET.
After a few months of improvement in the economic outlook, the ZEW index is expected to pull back with a reading of 45.6 in April compared with 48.5 in the previous month. A new sign that economic conditions in the euro-area are deteriorating could weigh on the EUR as the market begins to price expectations that the European Central Bank might start to play “QE catch-up” with the Fed and the Bank of Japan as early as the next meeting on May 2.
4. USD- U.S. Housing Starts, an important gauge of housing market activity measuring new home construction, Tues., Apr. 16, 8:30 am, ET.
Housing starts for the month of March are expected to be a bit higher to 924K from 917K in February. The report carries a risk of a negative surprise following another leading indicator of housing market activity, the National Association of Home Builders/Wells Fargo index, which fell to 42 in April from 44 in March, the third consecutive month of decline.
5. USD- U.S. Industrial Production, the main gauge of industrial activity measuring the output of factories, mines and utilities, Tues., Apr. 16, 9:15 am, ET.
Industrial production is forecast to increase for another month, but at a slower pace, by 0.3% m/m in March, after rising by 0.8% m/m in February.
6. GBP- Bank of England Meeting Minutes, a detailed report of the bank’s latest meeting containing an outlook on monetary policy and the economy, Wed., Apr. 17, 4:30 am, ET.
Bank of England sat on the sidelines at its April meeting and has made it clear in recent months that policy makers are not in a hurry to do more easing. However, the GBP could see pressures rising if the minutes reveal that more Monetary Policy Committee members, including the Governor Mervyn King, voted for an increase of the Asset Purchase Program from 375 billion to 400 billion pounds, and if the option of additional rate cuts was once again placed on the table.
7. CAD- Bank of Canada Interest Rate Announcement, Wed., Apr. 17, 9:00 am, ET.
With the U.S. and China, the world’s two largest economies, starting to show signs of a slowdown, the Bank of Canada will not be in a position to make any changes to its existing monetary policy and will more than likely leave the benchmark rate at the current 1.0% level. Compared with the rest of the major central banks, the Bank of Canada still remains as the most likely candidate to tighten monetary policy. However, with the world in the midst of a “currency war” as competitive currency devaluation heats up, the decision to call the end of the accommodative monetary policy would probably be pushed further into 2014/2015.
8. JPY- Japan Trade Balance, an important gauge of economic activity measuring the difference between imports and exports, Wed., Apr. 17, 7:50 pm, ET.
Despite of the yen’s weakness, the consensus forecasts point to another month of trade deficit by 494 billion yen in March from a deficit of 777 billion yen in February. Signs that the Japanese economy is not improving will keep the yen under pressure on expectations that the government and the Bank of Japan could step up their efforts to devalue the currency and to spur export growth.
9. USD- U.S. Jobless Claims, an important gauge of labor market conditions measuring claims for unemployment benefits, Thurs., Apr. 19, 8:30 am, ET.
Recovering after the unexpected spike, the U.S. jobless claims are forecast to remain in a range with a reading of 447K, close to last week’s 446K. If the forecast is accurate, the spike to 388K could be dismissed as a one-off event. On the other hand, another surprising increase could trigger concerns that a new trend of rising claims for unemployment benefits could be in its early stages of development.
10. JPY- G20 Meeting, Thurs., Apr. 18, and Fri., Apr. 19, two-day event.
Finance ministers and central bankers from the 20 most-developed industrialized nations in the world will gather as traders pay close attention to any statements or agreements that could be made during the G20 meeting on the issues of “currency wars” and competitive currency devaluation. The G20 did not directly criticize Japan at the last meeting. However, with the yen depreciating rapidly due to the unprecedented measures taken by the Bank of Japan, it would be interesting to see if the efforts of Japanese officials to weaken their currency will be criticized by their G20 colleagues this time around. The JPY negative trend is still intact, but we could see some unwinding of short yen positions ahead of the meeting.