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Published June 16, 2013, in Forex Outlook

Jun. 16, 2013 ( – In the week ahead all eyes will focus on the Federal Open Markets Committee meeting in search for clues of the Fed’s willingness 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., Jun. 18, 4:30 am, ET.

Inflationary pressures in the U.K. are forecast to rise to 2.7% y/y in May from 2.4% y/y in April. A pickup in the level of inflation could make it more difficult for the Bank of England to ease monetary policy in upcoming months.

2.    EUR- Euro-zone ZEW Economic Sentiment Index, a leading indicator of economic conditions measuring the outlook of financial experts, Tues., Jun. 18, 5:00 am, ET.

The ZEW index is expected to show a month of improvement with a reading of 38.0 in June compared with 36.4 in the previous month. The euro could get a boost from a report that instills optimism that recovery is underway in the euro-area.

3.    USD- U.S. Housing Starts, a leading indicator of housing market activity measuring construction of new residential properties, Tues., Jun. 18, 8:30 am, ET.

The weekly sequence of U.S. housing market data could start on a high note with housing starts forecast to increase to 924K in May from 853K in April. Strong U.S. data should continue to raise the odds of the Fed tightening monetary policy sooner rather than later.

4.    JPY- Japan Trade Balance, an important gauge of economic activity measuring the difference between imports and exports, Tues., Jun. 18, 7:50 pm, ET.

Finally, after all these months of significant yen weakness, the trade balance data could begin to show better results with the Japanese economy forecast to register a trade surplus of 1.2 trillion yen in May compared with 362 billion yen trade deficit in April. Signs that the economy is improving could reduce expectations that the government and the Bank of Japan would step up their efforts to devalue the yen and to spur economic growth.

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., Jun. 19, 4:30 am, ET.

As expected, the Bank of England sat on the sidelines in June and the minutes will probably confirm that policy makers were not rushing to make any changes a month before the bank’s new Governor Mark Carney takes his seat. Although we could see once again that some members voted for an increase of the Asset Purchase Program from 375 billion to 400 billion pounds, the overall content of the minutes report is not likely to deliver any surprises. The GBP, which has managed to stage a nice rally in recent weeks, could remain supported if the minutes do not hint of any impending easing moves by the Bank of England.

6.    USD- U.S. FOMC Interest Rate Announcement, Wed., Jun. 19, 2:00 pm, ET.

With the recent jobs report showing the economy creating more jobs in May but revealing some weaknesses like the unemployment rate inching higher and the participation rate declining, the Fed will be in no hurry to reduce the size of its monthly asset purchases. There is no doubt that the US central bank is considering taking the first step towards monetary policy tightening, but getting the timing of the QE reduction right will be a difficult task and the current fragile economic environment may not be very supportive of such move. The FOMC will probably remind the markets that policy can be adjusted depending on economic conditions, but will be more likely to stay the course with open-ended QE until the unemployment rate falls below 6.5% or inflation exceeds 2.5%. The USD could come under pressure if the Fed does not signal “tapering” of QE.

7.    CHF- Swiss National Bank Interest Rate Announcement, Thurs., Jun. 20, 3:30 am, ET.

In recent weeks, Swiss National Bank officials have made it clear that maintaining the franc cap at 1.20 per euro is “the right policy for the foreseeable future”. The Swiss central bank will more than likely echo this statement following its meeting. We could see unwinding of CHF long positions if the Swiss National Bank hints that it may be willing to consider additional options to weaken its currency.

8.    EUR- Euro-zone Composite PMI- Purchasing Managers Index, a leading indicator of economic conditions measuring activity in the manufacturing and services sectors, Thurs., Jun. 20, 4:00 am, ET.

Although the index might inch a bit higher, no relief from the chronic contraction in the euro-zone manufacturing and services sectors is expected to be seen yet. The Composite PMI is forecast to remain below the 50 boom/bust line for another month with a reading of to 48.1 in June from 47.7 in May. The euro could stay under pressure if the report fails to instill optimism that conditions in the euro-area are improving.

9.    GBP- U.K. Retail Sales, an important gauge of consumer spending measuring sales at retail establishments, Thurs., Jun. 20, 4:30 am, ET.

The disappointing 1.3% m/m drop in April is expected to be followed by 0.8% m/m increase in retail sales in May. The GBP could stay well bid if the report does not deliver a negative surprise.

10.    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., Jun. 20, 10:00 am, ET.

Sales of existing homes in the U.S. are forecast to break slightly above the 5 million mark with a reading of 5.01 million in May from 4.97 million in April. Further improvement of the housing and labor markets should be U.S. dollar supportive on expectations that the Fed could start reducing the size of its monthly asset purchases earlier than expected.

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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