Guest Post:

Published March 17, 2013, in Forex Outlook

Mar. 17, 2013 ( – In the week ahead all eyes will focus on the Federal Open Markets Committee meeting in search for clues of the Fed’s readiness to take the first step toward monetary policy tightening.

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.    GBP- U.K. CPI- Consumer Price Index, the main measure of inflation preferred by the Bank of England, Tues., Mar. 19, 5:30 am, ET.

Inflationary pressures in the U.K. are forecast to inch higher by 2.8% y/y in February from 2.7% y/y in January. As the threat of a triple-dip recession looms in the U.K., the current level of inflation is not prohibitive and the Bank of England could ease monetary policy further in upcoming months.

2.    EUR- Euro-zone ZEW Economic Sentiment Index, a leading indicator of economic conditions measuring the outlook of financial experts, Tues., Mar. 19, 6:00 am, ET.

After months of improvement in the economic outlook, the ZEW index is expected to pull back with a reading of 47.5 in March compared with 48.2 in the previous month.

3.    USD- U.S. Housing Starts, a leading indicator of housing market activity measuring construction of new residential properties, Tues., Mar. 19, 8:30 am, ET.

The first report in the weekly sequence of U.S. housing market data could continue to show signs of improvement with housing starts forecast to increase to 918K in February from 890K in January.

4.    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., Mar. 20, 5:30 am, ET.

At the Bank of England’s February meeting, more policy makers, including the Governor Mervyn King, voted for an increase of the Asset Purchase Program from 375 billion to 400 billion pounds. Moreover, even the option of additional rate cuts was once again placed on the table. If this report echoes the same and shows that the Monetary Policy Committee is ready to expand the size of its QE operations and to possibly cut rates in the near future, the GBP, which has managed to correct some of its losses last week, could easily resume its down trend against the USD and the EUR.

5.    USD- U.S. FOMC Interest Rate Announcement, Wed., Mar. 20, 12:30 pm, ET.

Despite of the improvement in the U.S. labor market and other sectors of the economy, the Fed has made it very clear that policy makers are committed to open-ended QE until the unemployment rate falls below 6.5% or inflation exceeds 2.5%. With the impact from the sequestration yet to be felt in the months ahead, the Fed is currently not in a position to start tightening and will maintain the current monetary policy course at its March meeting, and probably into 2014. In other words, QE and “exceptionally low levels for the federal funds rate” are here to stay and the greenback could come under pressure if the FOMC statement reminds the markets that the Fed is in no hurry to call it quits anytime soon.

6.    NZD- New Zealand GDP- Gross Domestic Product, the main measure of economic activity and growth, Wed., Mar. 20, 5:45 pm, ET.

The New Zealand economy is expected to grow at a faster pace by 0.9% q/q in the final quarter of last year, compared with 0.2% q/q in Q3 2012. The New Zealand dollar could get a boost from an economy that is gaining momentum, but any future gains could also increase the odds of a Reserve Bank of New Zealand intervention to “smooth the peaks” in its currency’s exchange rate.

7.     JPY- Japan Trade Balance, an important gauge of economic activity measuring the difference between imports and exports, Wed., Mar. 20, 7:50 pm, ET.

Although the yen has been weakened significantly, the consensus forecasts point to another month of trade deficit by 835.8 billion yen in February from a deficit of 1.629 million yen in January. 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 economic growth.

8.    EUR- Euro-zone Composite PMI- Purchasing Managers Index, a leading indicator of economic conditions measuring activity in the manufacturing and services sectors, Thurs., Mar. 21, 5:00 am, ET.

The chronic contraction in the euro-zone manufacturing and services sectors is expected to continue as the Composite PMI remains below the 50 boom/bust line for another month with a reading of to 48.1 in March from 47.9 in February. The euro could stay under pressure if the report fails to instill optimism that conditions in the euro-area are improving.

9.    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, Thurs., Mar. 21, 10:00 am, ET.

Following what is expected to be a positive housing starts report, sales of existing homes in the U.S. are also forecast to increase to 5.03 million in February from 4.92 million in January. The USD could continue to attract bids from stronger U.S. economic data on expectations that the Fed could start monetary policy tightening sooner rather than later.

10.     EUR- Germany IFO Business Climate Index, a leading indicator of economic conditions measuring the outlook of businesses, Fri., Mar. 22, 5:00 am, ET.

The business outlook in the euro-zone’s largest economy is forecast to improve with an increase in the Ifo index to 107.8 in March, compared with a reading of 107.4 in the previous month.

About Nickolas Pirraglia

Nick Pirraglia started his career in trading in 1991 after returning to the US as an Army Officer deployed in Iraq. He began as a bond broker and worked his way into trading. Expert mentoring, hard work and a disciplined approach to the markets has allowed Nick the ability to maintain a very successful career in Capital Markets and Trading for over 20 years as a professional OTC Market Maker and independent trader. Nick has also managed the trading desks for a two Dallas based capital management companies and traded equities for a Dallas based hedge fund. Nick has trained and mentored thousands of customers in the rigors of trading, technical analysis and risk controls. Recently, Nick had broadened his market experience through the design and product management of two automated trading platforms. He has the pleasure of working with some of the brightest minds in the trading community and has collaborated with experts in data, design, engineering and trading psychology. An avid long distance runner, Nick completed several marathon events, qualified for the Boston marathon, completed several long distance Triathlons to include finishing a full Ironman triathlon.
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