Apr. 21, 2013 (Allthingsforex.com) – A combination of notable economic data from the euro-area, coupled with the Bank of Japan’s monetary policy meeting and two GDP reports from the U.S. and the U.K., will offer plenty of excitement in the week ahead as the markets anxiously await to find out if the U.K. economy has averted an unprecedented triple-dip recession.
In preparation for the new trading week, here is a list of the Top 10 spotlight economic events that will move the markets around the globe.
1. USD- U.S. Existing Home Sales, the main gauge of the condition of the U.S. housing market measuring the number of closed sales of previously constructed homes, condominiums and co-ops, Mon., Apr. 22, 10:00 am, ET.
The report could start a sequence of upbeat U.S. economic data with sales of existing homes forecast to increase to 5.01 million in April, compared with 4.98 million in March.
2. EUR- Euro-zone Composite PMI- Purchasing Managers Index, a leading indicator of economic conditions measuring activity in the manufacturing and services sectors, Tues., Apr. 23, 4:00 am, ET.
Mired in recession, the euro-zone economy is expected to continue to suffer from a chronic contraction in its manufacturing and services sectors, as the Composite PMI stays in contraction territory below the 50 boom/bust line for another month with a reading of 46.3 in April from 46.5 in March. With economic growth still nowhere to be seen, the report could weigh on the EUR by increasing the odds that the European Central Bank might be forced to announce additional monetary policy easing measures as early as the bank’s next meeting on May 2.
3. USD- U.S. New Home Sales, an important gauge of housing market conditions measuring sales of newly-constructed homes, Tues., Apr. 23, 10:00 am, ET.
Similar to the existing home sales, a small increase is also expected in the U.S. new home sales, with consensus forecasts estimating a reading of 420K in March compared with 411K in February.
4. NZD- Reserve Bank of New Zealand Interest Rate Announcement, Tues., Apr. 23, 5:00 pm, ET.
The Reserve Bank of New Zealand joined “currency wars” in February with the Governor making it clear that intervention is being considered as an option to curb the persistent strength of the New Zealand dollar. In a world where competitive currency devaluation has become the norm, the New Zealand central bank will not be in a hurry to start tightening monetary policy. The Kiwi could weaken if the Reserve Bank of New Zealand issues another warning that its currency should not be considered as a “one way bet.”
5. EUR- Germany IFO Business Climate Index, a leading indicator of economic conditions measuring the outlook of businesses, Wed., Apr. 24, 4:00 am, ET.
This could become another economic report that fails to instill confidence that the euro-area is on a path to recovery. The business outlook in the euro-zone’s largest economy is forecast to be less optimistic with a decline in the Ifo index to 106.2 in April, compared with a reading of 106.7 in the previous month.
6. GBP- U.K. GDP- Gross Domestic Product, the main measure of economic activity and growth, Thurs., Apr. 25, 4:30 am, ET.
Following three consecutive quarters of contraction, the U.K. returned to growth in Q3 2012, only to see its economy contracting again by 0.3% q/q in the final quarter of last year. As a result, fears of unprecedented triple-dip recession in the U.K. escalated and could become a reality if the economy unexpectedly contracts in the first quarter of 2013. The consensus forecasts suggest that such scenario could be averted with the U.K. economy expected to dodge the triple-dip recession bullet and grow by 0.1% q/q in Q1. On the other hand, should the report signal a triple-dip recession, pressure on the GBP would mount on expectations of more QE by the Bank of England.
7. JPY- Japan CPI- Consumer Price Index, the main measure of inflation preferred by the Bank of Japan, Thurs., Apr. 25, 7:30 pm, ET.
The Japanese national core inflation gauge is forecast to drop by -0.4% y/y in March from -0.3% y/y in February. With the index sinking deeper into deflation territory and heading further away from the Bank of Japan’s 2% inflation target, the report could accelerate the trend of JPY weakness on expectations that the Bank of Japan might resort to even more aggressive measures to fight deflation and to spur economic growth by devaluing its currency.
8. JPY- Bank of Japan Interest Rate Announcement, Fri., Apr. 26, around 12:00 am, ET.
Since the Bank of Japan already gave the markets the “shock and awe” treatment earlier this month by doubling the size of asset purchases, the Japanese central bank will probably not rush to deliver even more fireworks. Policy makers will be likely to reaffirm their open-ended commitment to aggressive QE until the 2% inflation target is in sight. If the Bank of Japan does not announce anything we don’t already know, we could see the yen correcting some of its losses.
9. USD- U.S. GDP- Gross Domestic Product, the main measure of economic activity and growth, Fri., Apr. 26, 8:30 am, ET.
After the U.S. economy avoided contraction in the final quarter of last year, the preliminary GDP estimate is forecast to show the U.S. growing at a faster pace by 3.0% q/y in the first quarter of 2103, compared with 0.4% q/y in Q4 2012. The USD could benefit from accelerating U.S. economic growth report which could raise the odds that the Fed might take the first step toward monetary policy tightening sooner rather than later.
10. USD- U.S. Consumer Sentiment, the University of Michigan’s monthly survey of 500 households on their financial conditions and outlook of the economy, Fri., Apr. 26, 9:55 am, ET.
The final April reading of the U.S. consumer sentiment index is forecast to be revised higher to 74.3 from a preliminary estimate of 72.3. The report will wrap up what is expected to be a week of positive U.S. economic data that could boost investor sentiment and risk appetite.