August 11 2013

Aug. 11, 2013 ( – The euro will take the center stage in the week ahead as traders anticipate the GDP estimate from the euro-zone to confirm expectations that the 17-nation economy has finally returned to growth in the second quarter of the year.

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.    JPY- Japan GDP- Gross Domestic Product, the main measure of economic activity and growth, Sun., Aug. 11, 7:50 pm, ET.

Abenomics is expected to continue to make a positive impact in Japan with the GDP estimate forecast to show that the world’s third-largest economy stayed on a growth path, expanding by 0.9% q/q in the second quarter of 2013 after ending the recession and growing by 1.0% q/q in the first quarter of the year. The JPY strength could continue as positive economic data from Japan reduces expectations of the need for additional easing measures by the Bank of Japan.

2.    GBP- U.K. CPI- Consumer Price Index, the main measure of inflation preferred by the Bank of England, Tues., Aug. 13, 4:30 am, ET.

Inflationary pressures in the U.K. are expected to pull back to 2.8% y/y in July from the 2.9% y/y reading in June. Subdued inflation and upbeat economic data from the U.K. have significantly reduced the odds of more easing by the Bank of England, fueling a GBP rally that could extend if the economy strengthens further.

3.    EUR- Euro-zone ZEW Economic Sentiment Index, a leading indicator of economic conditions measuring the outlook of financial experts, Tues., Aug. 13, 5:00 am, ET.

The trend of improvement in the economic outlook is expected to continue with the ZEW index forecast to show a reading of 40.3 in August compared with 36.3 in the previous month. A more optimistic outlook should keep the euro supported.

4.    USD- U.S. Retail Sales, an important gauge of consumer spending measuring sales at retail establishments, Tues., Aug. 13, 8:30 am, ET.

Consumer spending in the U.S. is forecast to increase but at a slower pace by 0.2% m/m in July compared with 0.4% m/m in the previous month. The pressure on the USD could increase if economic data from the U.S. begins to soften.

5.    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., Aug. 14, 4:30 am, ET.

As the new Governor Mark Carney stated last week, the Bank of England has designated 7% unemployment as the threshold level to signal the end of easy monetary policy. Similar to the July meeting, a 9-0 vote against more QE will not be a surprise and will make it clear that policy makers are not in a hurry to do more easing. The GBP should remain well bid if the minutes reveal that expansion of the Asset Purchase Program is off the table for the time being.

6.     EUR- Euro-zone GDP- Gross Domestic Product, the main measure of economic activity and growth, Wed., Aug. 14, 5:00 am, ET.

In the first quarter of the year, the euro-zone economy failed to return to growth and contracted by 0.2% q/q. However, the prolonged recession may have ended in the second quarter with the 17-nation economy forecast to grow by 0.2% q/q. With the recessionary period of three consecutive quarters finally coming to an end, the EUR rally could extend further on optimism that the euro-area might be turning a corner.

7.    GBP- U.K. Retail Sales, an important gauge of consumer spending measuring sales at retail establishments, Thurs., Aug. 15, 4:30 am, ET.

U.K. consumers are expected to keep their wallets open with retail sales forecast to register a larger increase by 0.7% m/m in July compared with the 0.2% m/m in June. A strong retail sales report could give the GBP a boost.

8.    USD- U.S. Industrial Production, the main gauge of industrial activity measuring the output of factories, mines and utilities, Thurs., Aug. 15, 9:15 am, ET.

Another month of expansion in the U.S. industrial sector is forecast to bring the overall industrial production gauge higher with a 0.5% m/m increase in July, after growing by 0.3% m/m in the previous month.

9.    USD- U.S. Housing Starts, an important gauge of housing market activity measuring new home construction, Fri., Aug. 16, 8:30 am, ET.

Housing starts are expected to maintain their upward momentum with an increase by 910K in July from 840K in June, while building permits inch closer to the one million mark. The USD could benefit from a report that confirms that the housing market recovery is still intact.

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., Aug. 16, 9:55 am, ET.

The preliminary estimate of the U.S. consumer sentiment index for the month of August is forecast to show a reading of 85.6, slightly higher than 85.1in July. A weekly sequence of decent U.S. economic data should keep the expectations of a Fed tapering in September unchanged.