Oct. 29, 2012 (Allthingsforex.com) – The Japanese yen and the U.S. Dollar will take the center stage in the week ahead as most market participants anticipate an announcement of further monetary policy easing at the Bank of Japan’s upcoming meeting, while traders dissect the U.S. Non-Farm Payrolls and Employment Situation report for signs of consistent improvement in the labor market.
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. Personal Income and Outlays, a measure of consumer income and spending, released along with the PCE Price Index- the Fed’s preferred gauge of inflation, Mon., Oct. 29, 8:30 am, ET.
The first report should start the weekly sequence of U.S. economic data on up note with consumer spending forecast to increase by 0.6% m/m in September from 0.5% m/m in August and the personal income also up by 0.3% m/m from 0.1% m/m, while the Fed’s preferred core PCE Index stays at 0.1% m/m, same as the previous month’s reading.
2. JPY- Bank of Japan Interest Rate Announcement, Tues., Oct. 30, around 12:00 am, ET.
In the days leading to the meeting, the market has been pricing expectations that the Bank of Japan will have no other choice but to ease monetary policy further. Ten trillion yen of additional quantitative easing was not enough to weaken the yen in September and the Bank of Japan watched its currency rally in the aftermath of the monetary policy announcement. With the persistent strength of the yen still intact and with the latest data confirming that the economy is slowing, the Japanese central bank is faced once again with the tough task of finding new creative ways to weaken the yen and to add more impetus to a recovery that is losing momentum. Another 10 trillion yen of QE is probably already fully priced in and the yen could strengthen in the aftermath of such announcement, just as it did last month. On the other hand, if the Bank of Japan surprises with a “shock and awe” 15 or even 20 trillion yen QE expansion, the USD and other majors could find the necessary catalyst to break higher against the Japanese currency.
3. EUR- Italy 10-year Bond Auction, Tues., Oct. 30, 2:00 am, ET.
The Italian government will sell its benchmark 10-year bonds and traders will watch the auction results closely in order to find out if investors will demand higher premiums to hold the debt of the troubled nation. Rising borrowing costs and weak demand could increase the pressure on the euro.
4. USD- U.S. Consumer Confidence, a measure of consumers’ outlook on the economy, Tues., Oct. 30, 10:00 am, ET.
With the labor and the housing markets gaining some ground in recent months, the outlook of U.S. consumers is forecast to be a bit more optimistic, pushing the consumer confidence index higher to 72.0 in October from 70.3 in the previous month.
5. GBP- U.K. Manufacturing PMI, a leading indicator of economic conditions measuring activity in the manufacturing sector, Thurs., Nov. 1, 4:30 am, ET.
Following the upbeat GDP report which showed the U.K. economy returning to growth in Q3 after three consecutive quarters of contraction, the manufacturing sector might not instill much optimism in the recovery as the manufacturing index stays in contraction territory with a reading of 48.1 in October from 48.4 in September.
6. USD- U.S. ADP Employment Report, a measure of job creation in the private sector of the U.S. economy, Thurs., Nov. 1, 8:15 am, ET.
Job creation in the U.S. private sector is forecast to slow a bit with up to 135K jobs added in October compared with the better than expected 162K jobs in September.
7. USD- U.S. Jobless Claims, an important gauge of labor market conditions measuring first-time claims for unemployment benefits, Thurs., Nov. 1, 8:30 am, ET.
Volatility in the jobless claims data has increased in recent weeks, but nevertheless, there has been a trend of improvement with the four-week average maintaining around 365K. Last week’s report saw a bounce higher to 369K from the largest drop since February 2008 when jobless claims declined by 30K to 339K in the week before. A slight increase is expected to bring the current level of weekly jobless claims to 371K.
8. USD- U.S. ISM Manufacturing Index, a leading indicator of economic conditions measuring activity in the manufacturing sector, Thurs., Nov. 1, 10:00 am, ET.
Activity in the U.S. manufacturing sector is expected to pick up the pace with the index forecast to rise to 51.8 in October from 51.5 in September.
9. EUR- Euro-zone Manufacturing PMI, a leading indicator of economic conditions measuring activity in the manufacturing sector, Fri., Nov. 2, 5:00 am, ET.
Starkly different from its U.S. counterpart, the Euro-zone manufacturing sector is forecast to contract for another month as the manufacturing index stays below the 50 boom/bust line with a reading of 45.3 in October compared with 46.1 in the previous month.
10. USD- U.S. Non-Farm Payrolls and Employment Situation, the main indicator of U.S. economic health measuring job creation and unemployment, Fri., Nov. 2, 8:30 am, ET.
After the surprisingly positive September NFP data, we could see another month of decent job creation with the U.S. economy expected to add up to 120K jobs in October, compared with 114K in September, while the unemployment rate remains at 7.8%. The greenback could benefit if the U.S. labor market develops a consistent multi-month trend of improvement and if the economy continues to demonstrate resilience in the face of a global slowdown.