Forex Blog

December 29, 2011

British Pound (GBP) Breaks Down!

Filed under: Forex News — Tags: , , , , , , , , , , , , , , — admin @ 6:50 am

I have recently been talking about the range-bound nature in the markets of late and how good trading opportunities are available to trade between those ranges.  Most notably, I highlighted the British pound (GBP/USD) as one such opportunity.

Well there is also another opportunity that is available, and occurs when the range breaks out or breaks down.  This occurred yesterday when the US dollar strengthened and just about all other currencies sold off as a result.

The bottom of the range was at 1.5575 off of the previous swing low and that level broke down easily  As you can see from the chart, once that level was breached it was off to the races.  Now that level has become resistance, and could provide further opportunities for short entries as that level gets tested.

December 15, 2011

Forex Year End Checkup

Filed under: OANDA News — Tags: , , , , , , , — admin @ 2:01 pm

The latest infographic released by OANDA is a “tongue-in-cheek” look at the relative health for the world’s major currencies. Using some of the indicators that typically have the most impact on exchange rates, together with comments from authorities and government officials, the medical chart even offers a “prognosis” for the coming months.

No review of the past year could possibly begin with a topic other than the Eurozone debt crisis. Despite a dozen or so emergency meetings, and a few hundred billion in emergency funding being committed to the cause, the Eurozone picture is actually worse today than it was one year ago. On December 15th, Christine Lagarde, head of the International Monetary Fund, described the global outlook as “gloomy” and the peril facing the European economy in particular as “escalated”.

So what does this mean for other currencies? For the U.S., it probably means a gain in demand as during times of uncertainty, investors typically adopt a “safe haven” play by abandoning other currencies in favor of the dollar. For the Canadian and Australian dollars, weaker global demand for exports and raw materials could result in slower growth for the respective economies.

Click on the infographic below for a closer look at the major currencies:

Forex Year End Checkup

Created by OANDA

Eurozone Worries Crushing Japanese Confidence

Filed under: OANDA News, Uncategorized — Tags: , , , , , , , , , — admin @ 1:31 pm

By Sam Mattera
Benzinga Guest Writer

On Thursday, in a survey released by the Bank of Japan, confidence among Japanese manufacturers fell more than anticipated.

Analysts had forecast a reading of negative 2, while the actual figure was negative 4. The reading may be seen as fairly significant, as Japan’s economy remains dependent upon its manufacturing and exporting sector.

Japan’s Nikkei dropped over 1.60% in Thursday’s trading, as Japanese investors may have become concerned over the future prospects of Japan’s economy.

Investors in the US appeared to brush Japan’s struggles aside early Thursday morning, as futures rallied into the open. Surprising positive data coming in from Europe and a seemingly improving jobs picture in the US may have set a positive mood among US equity investors on Thursday.

In the Japanese survey, businesses cited uncertainty due to the Eurozone situation, a strong yen, and supply chain issues due to flooding in Thailand.
The first two issues that the businesses have may be largely interrelated – Japan’s yen may have strengthened because of issues in the Eurozone.

A strong yen may cut into the confidence of Japanese exporters, as it would make the price of Japanese goods more expensive to foreign consumers, and therefore may hurt demand.

The Bank of Japan has intervened a few times this year in an effort to drive down the value of the yen.

Following the tsunami disaster in March, the Japanese yen rose sharply. Insurance companies may have been forced to dump assets to raise cash, leading to a sharp increase.

Back then, central banks around the world worked in tandem to drive down the value of the yen. Yet, the yen rapidly bounced back in the following months as the situation in Europe deteriorated.

Then, the Bank of Japan intervened again—this time unilaterally—in October. Other central banks, perhaps worried about the value of their own currencies, did not offer support.

If Eurozone issues continue to worsen, the yen may stay strong. However, if the Eurozone situation improves, funds may shift out of the yen back to the euro, weakening the yen and improving the environment for Japan’s manufacturers.

December 11, 2011

Trading Week Outlook: Dec. 12 – Dec. 16

Filed under: Forex News — Tags: , , , , , , , , — admin @ 8:05 am

Dec. 10, 2011 (Allthingsforex.com) – In the aftermath of the ECB rate cut and yet another EU Summit attempt to save the euro, in the week ahead all eyes will turn to the FOMC monetary policy meeting in search for the missing piece of the QE3 puzzle.

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

Rising by 5.2% y/y in September, U.K. inflationary pressures have begun to subside to 5.0% y/y in October, and are expected to continue lower to 4.8% y/y in November. The pullback in inflation is in line with the Bank of England’s forecast and would be welcomed by policy makers set to continue the bank’s accommodative monetary policy, while keeping the door open to more quantitative easing if the economy weakens further.

2.    EUR- Euro-zone ZEW Economic Sentiment Index, a leading indicator of economic conditions and business expectations, Tues., Dec. 13, 5:00 am, ET.

Serving as a reminder of the deteriorating economic conditions in the Euro-zone, the ZEW economic sentiment index is forecast to register another drop with a reading -60.3 in December, compared with -59.1 in November.

3.    USD- U.S. Retail Sales, an important gauge of consumer spending measuring the total receipts at retail establishments, Tues., Dec. 13, 8:30 am, ET.

Consumer spending is a major part of the U.S. economy and retail sales could demonstrate resilience with a second consecutive monthly increase by 0.6% m/m in November from 0.5% m/m in October.

4.    USD- U.S. FOMC- Federal Open Market Committee Interest Rate Announcement, Tues., Dec. 13, 2:15 pm, ET.

At the press conference following the last FOMC meeting, the Fed Chairman made it clear that all options are “on the table”, including a “third round of securities purchases, extending the period of record- low interest rates or being more specific about when rates would rise”. Although the Fed could keep the door open to QE3, the recent resilience of the U.S. economic data, which rules out a double dip, makes an announcement of another round of quantitative easing less likely to come at the December 13 meeting. As far as the record low rates, the Fed has already made a commitment to keep the status quo at least until 2013. For the time being, expect a continuation of the Fed’s accommodative monetary policy with QE3 ready to be deployed in case future economic conditions and the EU debt crisis take a turn for the worse. The USD might be able to attract some bids if the Fed puts QE3 on the back burner.

5.    GBP- U.K. Jobless Claims and Unemployment Rate, the main gauges of employment trends and labor market conditions, Wed., Dec. 14, 4:30 am, ET.

Following the anticipated pullback in inflation, the U.K. employment report has the potential to become another risk event for the pound. Forecasts point to an increase in the amount of jobless claims by up to 17,000 in October from 5,300 in September, while the unemployment rate stays unchanged at 8.3%.

6.    JPY- Japan Tankan Index, Bank of Japan’s quarterly survey of large and small manufacturing and services companies, which serves as the main indicator of economic conditions in Japan, Wed., Dec. 14, 6:50 pm, ET.

The Japanese economic activity slowed significantly in Q2 2011 as a result of the devastating earthquake and tsunami but recovered in the third quarter, however the Bank of Japan’s benchmark survey is expected to underline some weaknesses with a manufacturing sector index reading of -2 from 2 in Q2 and a flat services sector reading of 1, same as the second quarter.

7.    CHF- Swiss National Bank Interest Rate Announcement, Thurs., Dec. 15, 3:30 am, ET.

With deflationary pressures mounting, the strong franc hurting exporters and the economy, and the euro incapable of appreciating beyond its recent range versus the franc, it would not be a surprise to see the Swiss National Bank forced into additional action to curb the strength of its currency. The “mystery” surrounding the next step of the SNB has managed to keep the euro above the minimum exchange rate target of 1.20 against the franc. However, it may be only a mater of time before the Swiss National Bank gives in to political pressure for much bolder measures, including raising the EUR/CHF exchange rate floor from 1.20 to 1.30.

8.    EUR- Euro-zone HICP- Harmonized Index of Consumer Prices, the main measure of inflation, Thurs., Dec. 15, 5:00 am, ET.

Despite of the stubbornly high inflation, fighting it has not been the current focus of the European Central Bank and the latest rate cuts were a testament to the bank’s new priority- stimulating economic growth in an effort to avoid a double dip. Although inflationary pressures in the Euro-zone are expected to remain unchanged at 3.0% y/y in November, same as the 3.0% y/y reading in October, expect the European Central Bank to continue to “look the other way”.

9.    USD- U.S. Jobless Claims, an important gauge of employment trends and labor market conditions, Thurs., Dec. 15, 8:30 am, ET.

Throughout 2011, this weekly column has regularly mentioned 375,000 as the number to watch as a leading indicator of consistent improvement in the U.S. job market and future decline in the unemployment rate. Consensus forecast are pointing to a move higher to 389K, but with last week’s drop to 381,000, the jobless claims have registered a nine-month low and are approaching the 375K mark.

10.    USD- U.S. CPI- Consumer Price Index, the main measure of inflation, Fri., Dec. 16, 8:30 am, ET.

Inflation would probably remain a non-issue for the Fed with forecasts expecting a flat 2.1% y/y reading in the November Core CPI, which excludes volatile food and energy costs.

November 13, 2011

Trading Week Outlook: Nov. 14 – Nov. 18

Filed under: Forex News — Tags: , , , , , , , , , , , , — admin @ 10:42 am

Nov. 12, 2011 (Allthingsforex.com) – In case the market decides to pay attention not only to headlines from Italy and Greece but also to economic data, the week ahead will offer plenty of insights on inflation and economic conditions in some of the world’s largest economies.

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., Nov. 13, 6:50 pm, ET.

After registering its third recession in a decade and contracting by 0.9% q/q in Q1 and 0.5% q/q in Q2, the preliminary GDP estimate for the third quarter of 2011 is forecast to show the Japanese economy returning to growth by up to 1.5% q/q in Q3 2011. More upbeat GDP report and safe-haven flows should keep the yen supported in spite of the desire of the Japanese authorities to see their currency weaken.

2.    GBP- U.K. CPI- Consumer Price Index, the main measure of inflation preferred by the Bank of England, Tues., Nov. 15, 4:30 am, ET.

The September spike in inflationary pressures to 5.2% y/y could be followed by a slight pullback to 5.1% y/y in October. Stubbornly high inflation, however, has not prevented the Bank of England from continuing its accommodative monetary policy and doing more quantitative easing.

3.    EUR- Euro-zone GDP- Gross Domestic Product, the main measure of economic activity and growth, Tues., Nov. 15, 5:00 am, ET.

More signs of deteriorating conditions in the Euro-zone’s economy might come from the third quarter GDP estimate with forecasts pointing to only 0.2% q/q growth- same as the 0.2% q/q reading in Q2 2011. The GDP report will be released at the same time as the German ZEW economic sentiment index which is also expected to be weak with the index dropping to -52.1 in October from -48.3 in October.

4.    USD- U.S. Retail Sales, an important gauge of consumer spending measuring the total receipts at retail establishments, Tues., Nov. 15, 8:30 am, ET.

A lot is riding on this report as consumer spending is a major part of the U.S. economy, but retail sales might not demonstrate a lot of strength with a smaller increase by 0.2% m/m in October from 1.1% in September. However, the slowdown could be temporary as sales at retail establishments would likely see a boost in the upcoming months due to the holiday shopping season.

5.    JPY- Bank of Japan Interest Rate Announcement, Wed., Nov. 16, around 12:00 am, ET.

With the U.S. dollar slowly but surely erasing a big chunk of its post-intervention gains against the yen, it would be interesting to find out if the Bank of Japan is ready to stand against the tide of persistent yen strength. This is provided that they haven’t intervened by the time the meeting takes place, as another intervention remains a likely event.

6.    GBP- U.K. Jobless Claims and Unemployment Rate, the main gauges of employment trends and labor market conditions, Wed., Nov. 16, 4:30 am, ET.

The U.K. employment data followed an hour later by the Bank of England inflation report could become a couple of back-to-back risk events for the pound. Forecasts point to an increase in the amount of jobless claims by up to 20,000 in October from 17,500 in September, while the unemployment rate inches higher to 8.2% from a previous reading of 8.1%.

7.    EUR- Euro-zone HICP- Harmonized Index of Consumer Prices, the main measure of inflation, Wed., Nov. 16, 5:00 am, ET.

The European Central Bank’s preferred inflation gauge is forecast to stay unchanged at 3.0% y/y in October- same as the 3.0% y/y reading in September, but month-over-month the index is expected to pull back with a smaller 0.3% m/m increase in October from 0.8% in the previous month. Shifting monetary policy from maintaining price stability to pro-growth on the threat of a double dip in the economy could spell further ECB rate cuts.

8.    GBP- Bank of England Inflation Report, the bank’s official assessment and outlook on inflation, Wed., Nov. 16, 5:30 am, ET.

As the latest PPI report showed inflationary pressures coming off their recent highs, if the Bank of England offers a dovish outlook on inflation, there will be no urgency for the bank to start tightening monetary policy anytime soon. Lower inflation expectations and risk aversion could lead to some unwinding of long GBP positions.

9.    USD- U.S. CPI- Consumer Price Index, the main measure of inflation, Wed., Nov. 16, 8:30 am, ET.

Consumer prices in the United States could remain a non-issue for the Fed with forecasts expecting a flat 0% m/m reading in October from 0.3% m/m in September. Only a significant drop in unemployment and consistent improvement in the U.S. job and housing markets could change the Fed’s mind and its promise to keep rates “exceptionally low”. Until then, QE3 would not be completely out of the picture.

10.    USD- U.S. Housing Starts, a leading indicator of housing market activity measuring construction of new residential properties, Thurs., Nov. 17, 8:30 am, ET.

Losing momentum after the jump to 658K in September, the U.S. housing starts are forecast to decline to 610K in October, while the building permits flatten in the 600K range.  

November 8, 2011

Forex Market Outlook 11/8/11

Filed under: Forex News — Tags: , , , , , , , , — admin @ 6:38 am

Today is one of those days where there is seemingly nothing happening, with little economic data released but one major event holding the market’s attention.  The budget acceptance vote in Italy is now being viewed as a proxy for Berlusconi’s power in Italy and the potential for political theatrics at this vote could bring about a no confidence vote for the Premier.

Essentially what is taking place today is the Italian Parliament is voting on whether to accept the budget for 2010 (last year) and while it is expected to pass, some members may abstain from the vote in an attempt to show their displeasure with Berlusconi.  If this occurs and the abstention is great, then there will be pressure for a no confidence vote which could lead to his resignation.  This is the ideal scenario for the market, as they would prefer to see a technocrat in office who can navigate the economy and bring Italy back to fiscal health. 

However, Italian politics is such that this could be a drawn out process.  It must be noted that Berlusconi has a media empire and controls several newspapers, so he has a much louder voice than most.  It will be interesting to see what comes about, but recent rises in Italian bond yields may make it more expensive for the government to service its debt if the political uncertainty continues.

Things are going a lot nicer in Greece, where PM Papandreou has reportedly said his goodbyes as they are close to forming a unity government intended to enact the measures laid in the debt crisis deal.  Speaking of that deal, it is expected to be operational by next month, provided these governments can get their houses in order though timelines have known be extended in Europe.

On the data front, the Aussie was lower overnight as the Australian trade surplus came in lower than expected, though it is rebounding on risk appetite this morning.  Stocks and commodities are higher to start the day, though in general the currency markets have been trading in a tight range.

The British pound has also been moving higher as it benefits form money flows leaving the Euro.  Both industrial and manufacturing production figures in the UK came in as or slightly better than expected which is acceptable at this point given the state of their economy.  Later this morning, an unofficial GDP estimate will be released.

As soon as the Swiss franc starts to weaken on its own (see yesterday’s chart of the day), the market takes notice and starts to buy it again!  Consumer confidence figures came in worse than expected but the big news was a statement from the SNB that claimed that they would manipulate the currency for competitive advantages in exporting goods and services.  The market has taken this to mean that there will be no further intervention, after yesterday’s calls to move the peg to the Euro up to 1.25 from 1.20.

In the US not much is happening today, with some Fedspeak due out later today.  This will likely produce little in the way of market reaction as it is insignificant in the grand scheme of things. 

Meanwhile the debt debate here in the US continues forward and the media is grasping at the slightest indication of any news.  It is times like these when the markets can become jittery, as unexpected releases could produce market movement.

Right now the currency market is trading a fairly tight range, so I prefer to keep my trades to the near-term and attempt of buy ahead of support and sell ahead of resistance, essentially trading the range.   The risk at this point to putting on longer-term positions at these levels is too great, so until some clarity emerges I will stick to the shorter-term.

November 7, 2011

Forex Market Outlook 11/7/11

Filed under: Forex News — Tags: , , , , , , , , , — admin @ 6:54 am

Goodbye Greece, hello Italy!  That’s pretty much what the markets are saying right now as Greece is in the rearview mirror and now Italy is to the forefront.  Over the weekend, Greece PM Papandreou agreed to form a coalition government and to step down from that government when it is formed.  In Italy, PM Berlusconi is trying to see whether or not he can hang on to power but it is beginning to look doubtful.

Tomorrow, Italy faces a major vote on its budget and both allies and opponents of Berlusconi are calling for him to step down.  His own hubris may get in the way of this being anything but a three-ring circus, but the most important thing to note is that bond yields are rising in Italy as the market is not convinced that they can do enough in the current political environment to slash budgets in order to continue receiving ECB support.  Even though he survived a confidence vote a few weeks ago, Berlusconi’s days appear to be numbered.

This is seen as a positive by the markets that feel that Berlusconi has been an impediment to economic health so his departure is preferred.  Perhaps then he will be able to release his album of love songs.  Seriously.  In Greece, the situation may be less eventful but nevertheless risk remains.  If a new coalition government is formed, they had better be prepared to institute the terms of the bailout agreement.  At times it seemed like Papandreou was the only sensible one there and when he leaves there could be problems.

So the short and long of it is that the euro debt crisis is still very active like a volcano, with the potential to erupt at any time.  As contagion starts to affect the larger economies like Italy and Spain, the dominoes could fall very quickly. 

On the economic data front, Euro zone retail sales figures came in worse than expected and German Industrial production figures also came in worse than expected, showing signs that Draghi’s “mild recession” call may be spot on.   Thursday’s Euro zone CPI report and EC economic growth forecast will highlight the news out of the Euro zone, as will the unfolding drama of Berlusconi trying to hold on to power.

Also, CPI data in Switzerland showed a decline in prices which could be the harbinger of deflationary forces starting to materialize.  The unemployment rate remained at 3% as expected, and the Swiss franc is weakening as the SNB contemplates a pre-emptive battle against deflation.  Switzerland has been relatively quiet of late after the peg against the Euro was enacted.

There is more data out from the UK this week, highlighted by Wednesday’s GDP estimate and Thursday’s BOE rate policy decision which is expected to produce no change.  The Pound has been strengthening as money has been leaving the EU in favor of the UK.

There is also a slew of economic data coming out of China on Wednesday and Thursday which could affect both the Aussie and Kiwi as both of those economies are dependant upon Chinese growth.  Australia has employment figures due out on Thursday as well.

In the US, there are no significant data releases to speak of so usually the Fed takes this opportunity to hit the rubber chicken circuit and discuss various economic topics.  At the end of the day this will likely amount to nothing but you never know when someone will slip up and say the wrong thing.  “Fedspeak” is generally intended to goose markets higher.

Meanwhile commodities, particularly gold, have been trading like safe-haven currencies and have decoupled a bit from the risk trade as they seem like more attractive places to store wealth.  Stocks are mixed to start the morning, but I could see risk appetite emerging at some point today.

So there is a lot going on this week, but not much of anything if that makes sense.  Berlusconi’s fate will be watched closely by the markets and the quicker he leaves, the better.  Italian politics though is a messy arena so expect the markets to remain on edge until clarity emerges.

October 31, 2011

Forex Market Outlook 10/31/11

Filed under: Forex News — Tags: , , , , , , , , , , , , — admin @ 7:04 am

This Halloween is turning out to be more trick than treat as the market digests the events of the past week, particularly the Euro debt resolution.  This week is starting out in risk aversion mode with US dollar strength and stock market and commodities weakness.

One of the “tricks” from over the weekend was the unilateral currency intervention by the Ministry of Finance in Japan, who took action to weaken the Yen citing excessive speculation and one-sided moves that don’t reflect the underlying economic fundamentals.  This has caused the Yen to fall some 4% vs. USD and is the third intervention this year undertaken by the Japanese.  It must be noted, however, that this intervention was taken by the government itself and not the Bank of Japan.

So this week has started out with a bang in what is going to be a heavy week for economic data around the globe.  A G-20 meeting, Central bank decisions, GDP figures, and employment numbers all can move markets so this week is likely to see some volatility which is great for the shorter-term traders.  Let’s start with the highlights region by region from around the globe and discuss the potential data moving events taking place this week. 

In Australia, tomorrow’s RBA rate policy decision will be significant if they lower rates by 25bp as some are expecting, though the overall consensus is still for no change.  This means that the statement will likely be dovish as inflation concerns are less important than the global growth story.  This announcement will be preceded by Chinese PMI manufacturing figures which may be more impactful as it gives a gauge of Chinese growth which ultimately is a proxy for the Australian economy. 

In New Zealand, building permits plunged by some 17% although gains of 2% were expected and Wednesday’s unemployment rate is expected to improve to 6.4%.

In the Euro zone, there are still many questions to be answered with regard to the details of the resolution and now it looks like banks want to use accounting gimmicks to re-capitalize rather than raise private funding.  CPI data came in slightly higher than expected, showing inflation at 3% vs. the 2.9% expectation.  This is unlikely to impact Thursday’s rate decision, though the ECB may attempt to come off hawkish to prove they are sticking with their mandate.  German retail sales figures came in lower than expected and their unemployment figures are due out on Wednesday.

The Pound is lower as home price figures came in lower than expected and tomorrow’s GDP figures are expected to showing slow growth, though it must be noted that the decline in government spending may be responsible.  Various PMI figures are spread out along the week so these may be better barometers of the health of UK business and industry.

In Canada, GDP figures came in better than expected this morning, showing a YoY figure of 2.4% vs. the expectation of 2.2% with the quarterly figure higher by .1%.  Raw materials and producer prices were also higher so there may be signs that inflation is starting to pick up.  Friday’s employment report is expected to show 15K jobs added and the unemployment rate to remain steady at 7.1%.

And finally here in the US, this Friday’s NFP is expected to show a gain of 95K jobs and the unemployment rate to remain steady at 9.1%, though those estimates can change in the ensuing days.  Wednesday’s FOMC meeting may be significant if Bernanke hints at further monetary easing or QE3.  While corporate earnings have been good, unemployment has been stubbornly high and the Fed chief just can’t help himself and see the need to tinker with policy as if it makes a difference.  At this point he is likely pushing on a string and money can’t get much cheaper—its up to fiscal policy now to determine the fate of the economy and whether or not confidence will be instilled.

The deficit super-committee is charged with finding an answer and at this point the prospects don’t look good.  Add in a G-20 meeting this week which may show how much IMF involvement (read US taxpayer) is included in the Euro debt deal and we will see some volatility.

October 27, 2011

Forex Market Outlook 10/27/11

Filed under: Forex News — Tags: , , , , , , , , , , , — admin @ 7:17 am

Well the Euro debt crisis is finally over, or is it?  So what happens next?  That folks, is the million dollar question but first we should take a look at the events of the last 24-hours and what was revealed as the definitive resolution.

Yesterday there was some market volatility and initial risk aversion as the rumors were making the rounds and we were expecting the announcement to take place some time near the end of yesterday’s trading session.  When it appeared as thought this process would be delayed into late last night, the markets reversed and risk appetite increased in anticipation of the announcement.

The announcement finally came late last night and here are the highlights of the plan of action:

October 16, 2011

Trading Week Outlook: Oct. 17 – Oct. 21

Filed under: Forex News — Tags: , , , , , , , , , , , — admin @ 8:05 am

Oct. 15, 2011 (Allthingsforex.com) – Although it would be interesting to see what a couple of forward-looking sentiment indexes from the Euro-zone and the U.S. housing, industrial activity and inflation reports might have to add to the current global economic backdrop, the trading week ahead will be all about Sunday’s EU Summit as traders anxiously await to find out more details on the promised by European leaders new plans to put out the fire from the EU sovereign debt crisis.

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. Industrial Production, the main gauge of industrial activity measuring the output of factories, mines and utilities, Mon., Oct. 17, 9:15 am, ET.

Despite of the unexpected increase in the ISM Manufacturing PMI, the U.S. industrial production could lose some momentum in September with a reading of 0.1% m/m, down from 0.2% m/m in August.

2.    CNY- China GDP- Gross Domestic Product, the main measure of economic activity and growth, Mon., Oct. 17, 10:00 pm, ET.

As a result of the global slump, the world’s second-largest economy China is expected to slow, although not dramatically, to 9.2% q/y from 9.5% q/y in Q2 2011.

3.    GBP- U.K. CPI- Consumer Price Index, the main measure of inflation preferred by the Bank of England, Tues., Oct. 18, 4:30 am, ET.

Inflationary pressures in the U.K. are forecast to stay stubbornly high and even spike up to 4.9% y/y in September, compared with 4.5% y/y in August. Even though it might be a long shot, the GBP could attract some bids on expectations that, in light of rising inflation, the Bank of England could decide to limit the size of the recently-announced additional asset purchases.

4.    EUR- Euro-zone ZEW Economic Sentiment Index, a leading indicator of economic conditions and business expectations, Tues., Oct. 18, 5:00 am, ET.

The ZEW institute’s survey is expected to deliver another indicator of the deteriorating economic conditions in the Euro-zone with the economic sentiment index forecast to register a larger -45.0 decline in October, compared with -43.3 in August.

5.    GBP- Bank of England Monetary Policy Committee Meeting Minutes, a comprehensive report of the central bank’s meeting that could provide an outlook on the economy, interest rates and future monetary policy, Wed., Oct. 19, 4:30 am, ET.

The minutes should serve as a reminder of the fears of contagion from the EU debt crisis and the threat of a double dip for the U.K. economy which were the main reasons behind the Bank of England’s decision to offer more quantitative easing and to expand the bank’s Asset Purchase Program by another 75 billion pounds. In other words, heightened event risk for the GBP…

6.    USD- U.S. U.S. Housing Starts, a leading indicator of housing market activity measuring construction of new residential properties, and U.S. CPI- Consumer Price Index, the main measure of inflation, Wed., Oct. 19, 8:30 am, ET.

While the U.S. housing starts are forecast to increase up to 590K in September from 571K in August, the building permits are expected to decline to 610K in September from 630K in the previous month.

Still not large enough of an increase to cause the Fed to reconsider its promise to keep rates “exceptionally low through 2013”, the core consumer price index, which excludes food and energy costs, is expected to rise to 2.1% y/y in September from 2.0% y/y in August.

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

The U.K. consumer spending is forecast to increase by 0.1% m/m in September, compared with the 0.2% m/m drop in August.

8.    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., Oct. 20, 10:00 am, ET.

After rising to 5.03M in August, the sales of existing homes in the U.S. are forecast to slow to 4.91M in September, confirming the lack of significant improvement in the U.S. housing market.

9.    EUR- Germany IFO Institute Business Climate and Expectations Index, a leading indicator of economic conditions and business expectations in the Euro-zone’s largest economy, Fri., Oct. 21, 4:00 am, ET.

In the aftermath of the anticipated drop in the ZEW economic sentiment index, the German IFO index is forecast to follow suit with a reading of 106.5 in October from 107.5 in the previous month.

10.     EUR- EU Summit of leaders of the 27 countries in the European Union, Sun., Oct. 23, all day.

Without a doubt, the main event of the trading week, the EU Summit is when the markets around the world expect to see the promised “comprehensive strategy on the euro-area sovereign debt crisis”. The summit was postponed because EU leaders needed more time to finalize their new plans on how to prevent further contagion, recapitalize banks, and conclude discussions on the next bailout installment for Greece. “Better late than never” optimism that EU leaders have finally realized the seriousness of the situation after about 18 months since the beginning of the crisis, has helped investor sentiment and risk appetite, with the euro registering its biggest rally since March, 2009. A lot is riding on this summit and if the EU leaders deliver anything short of spectacular, disappointment and risk aversion could quickly set back in, renewing the pressure on the single currency.

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