July 14 2013

Jul. 14, 2013 (Allthingsforex.com) – Two testimonies on Capitol Hill by the Fed Chairman Ben Bernanke will come to the forefront of the market’s attention in the week ahead as traders look for clarity on the future direction of the U.S. central bank’s monetary policy.

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.    USD- U.S. Retail Sales, an important gauge of consumer spending measuring sales at retail establishments, Mon., Jul. 15, 8:30 am, ET.

Consumer spending in the U.S. is forecast to keep the momentum going with another month of increase by 0.7% m/m in June compared with 0.6% in the previous month.

2.    GBP- U.K. CPI- Consumer Price Index, the main measure of inflation preferred by the Bank of England, Tues., Jul. 16, 4:30 am, ET.

Inflationary pressures in the U.K. are expected to rise by 3.0% y/y in June, up from the 2.7% y/y reading in May. If economic conditions deteriorate, inflation will not be an obstacle for the Bank of England to ease monetary policy further in upcoming months, but for the time being a jump in inflation should reduce the odds of more easing and could lend some support to the GBP.

3.    EUR- Euro-zone ZEW Economic Sentiment Index, a leading indicator of economic conditions measuring the outlook of financial experts, Tues., Jul. 16, 5:00 am, ET.

The forward-looking indicator has registered a few months of improvement in economic outlook and this trend is expected to continue with the ZEW index forecast to show a reading of 40.0 in July compared with 38.5 in the previous month. A more optimistic outlook on economic conditions in the euro-area could become euro-supportive but not for too long as the market still sees the European Central Bank stuck firmly in an easing mode.

4.    USD- U.S. CPI- Consumer Price Index, the main measure of inflation in the world’s largest economy, Tues., Jul. 16, 8:30 am, ET.

The U.S. inflation gauge is forecast to inch higher to 1.6% y/y in June from 1.4% y/y in May. Although still far from the Fed’s 2.5% threshold, the USD could draw strength from rising inflationary pressures on expectations that the Fed could start to tighten monetary policy sooner rather than later.

5.    USD- U.S. Industrial Production, the main gauge of industrial activity measuring the output of factories, mines and utilities, Tues., Jul. 16, 9:15 am, ET.

Industrial production is forecast to pick up the pace with a 0.3% m/m increase in June, after staying flat in the previous month.

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., Jul. 17, 4:30 am, ET.

Bank of England sat on the sidelines at the first meeting with Mark Carney as the bank’s new Governor. The expected 7-2 majority vote against more QE will make it clear that policy makers are not in a hurry to do more easing at this point. On the other hand, the Bank of England’s leader also stated that there will be no tightening in the near future. The GBP could see pressures rising if the minutes reveal that more Monetary Policy Committee members, including the new Governor Carney, voted for an increase of the Asset Purchase Program from 375 billion to 400 billion pounds, and if the option of additional QE was once again placed on the table.

7.    USD- U.S. Housing Starts, an important gauge of housing market activity measuring new home construction, Wed., Jul. 17, 8:30 am, ET.

Housing starts for the month of June are expected to regain their upward momentum with an increase to 950K from 910K in May, while building permits reach the one million mark in June. The report could confirm that the housing market recovery is still intact, despite of the drop in mortgage applications because of higher rates.

8.    CAD- Bank of Canada Interest Rate Announcement, Wed., Jul. 17, 10:00 am, ET.

With all other major central banks not ready to call the end of the easy policy cycle, the Bank of Canada might not be too adventurous 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, such decision would probably be pushed further into 2014/2015.

9.    USD- U.S. Federal Reserve Chairman Testimony, Wed. and Thurs., Jul. 17 and 18, 10:00 am, ET.

All eyes will focus on the Fed Chairman Ben Bernanke’s testimonies in front of the House Financial Services Committee and the Senate Banking Committee after last week he reassured the markets that the U.S. central bank’s policy will remain “highly accommodative for the foreseeable future”. As a result, the USD has come under pressure, but the greenback could see its positive trend continuing if the Fed Chairman signals that tapering of the monthly asset purchases is only a matter of time, despite of the Fed’s lack of urgency to end the QE program completely.

10.    GBP- U.K. Retail Sales, an important gauge of consumer spending measuring sales at retail establishments, Thurs., Jul. 18, 4:30 am, ET.

U.K. consumers may have spent less last month with retail sales forecast to register a smaller increase by 0.4% m/m in June compared with the 2.1% m/m jump in May. A weak retail sales report could increase the odds of more easing by the Bank of England and could weigh on the GBP.