Market Movers: The Week Ahead

Following last week’s series of central bank announcements and economic data from the U.S. and the euro zone, this week's focus will shift to the U.K. where the Bank of England will release its outlook on inflation, as well as to Japan and Australia where the two countries’ central banks will decide on their next steps when it comes to monetary policy.

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) AUD
Reserve Bank of Australia Interest Rate Announcement, Tues., Aug. 7, 12:30 am, ET.

With the Fed, the European Central Bank and Bank of England all deciding to sit on the sidelines, the Australian Central Bank should follow suit as it's expected to keep its benchmark rate unchanged at 3.50%. However, in light of the global economic slowdown, it would not be surprising to see the Reserve Bank of Australia keeping the door open to another 25 or 50 bps interest-rate reduction in the near future. The Australian dollar could begin to feel the pressure if the central bank gives a hint of an impending rate cut.

2) CHF
Swiss CPI- Consumer Price Index, the main measure of inflation preferred by the Swiss National Bank, Tues., Aug. 7, 3:15 am, ET.

A little over a month ahead of the Swiss National Bank’s monetary policy meeting on September 13, the inflation report is expected to confirm that deflation continues to be a threat to the Swiss economy. The inflation gauge is forecast to head deeper into deflation territory at -0.5% y/y from the previous month’s reading of -0.3% y/y. Last September, the Swiss National Bank had to resort to extraordinary measures to cap its currency’s gains and, as long as deflation and the strong franc continue to be a problem, odds remain high that the Swiss National Bank could be forced to take bold new measures to weaken the franc.

3) GBP
U.K. Industrial Production, an important gauge of industrial activity measuring the output of factories, mines and utilities, Tues., Aug. 7, 4:30 am, ET.

Delivering another sign of deteriorating economic conditions, the U.K. industrial output is forecast to drop by 2.5% m/m in June compared with the 1.0% m/m increase in May.

4) GBP
Bank of England Inflation Report, the central bank’s official assessment and outlook on inflation and the economy, measure of private sector job creation and labor market conditions, Wed., Aug. 8, 5:30 am, ET.

Inflationary pressures in the U.K. have fallen in recent months from record high levels and, if the Bank of England expects this trend to continue, inflation should not be an obstacle if the central bank feels the need to consider additional monetary policy easing. The GBP could come under pressure on expectations of more QE and possibly even a rate cut that may come in the not-too-distant future if the central bank’s report forecasts lower inflation and further economic weakness.

5) NZD
New Zealand Employment Situation and Unemployment Rate, the main gauges of labor market conditions measuring job creation and unemployment, Wed., Aug. 8, 6:45 pm, ET.

Despite of the global slowdown, the New Zealand labor market is expected to remain resilient with 0.4% q/q change in employment and a decline in the unemployment rate to 6.5% from 6.7% in the previous quarter. The Kiwi dollar could attract more bids as a result of a strong employment report.

6) AUD
Australia Employment Situation and Unemployment Rate, the main gauges of labor market conditions measuring job creation and unemployment, Wed., Aug. 8, 9:30 pm, ET.

Unlike its smaller neighbor, New Zealand, the Australian labor market has consistently shown signs of weakness in recent months with some unexpected declines in job numbers. Following another shocking drop by 27,000 in June, the Australian economy is forecast to add up to 10,000 new jobs in July, but not enough to offset the previous month’s loss. The unemployment rate is expected to inch higher to 5.3% in July compared with 5.2% in June. A weak employment report could weigh on the Aussie dollar on expectations that the Reserve Bank of Australia might be forced into additional rate cuts to stimulate the economy.

7) CNY
China CPI- Consumer Price Index, the main measure of inflation, Wed., Aug. 8, 9:30 pm, ET.

Just like its U.S. and European counterparts, China's central bank and policy makers are already talking more stimulus. It looks like inflation will not stand in their way with the consumer price index forecast to decline to 1.7% y/y in July compared with 2.2% y/y in June. The AUD, NZD and other commodity currencies could get a boost from the report.

8) JPY
Bank of Japan Interest Rate Announcement, Thurs., Aug. 9, around 12:00 am, ET.

The Bank of Japan is the most likely candidate to announce more monetary policy easing in August. There is massive political pressure on the central bank to do exactly that as a tool to spur economic growth and to weaken the yen. On the other hand, since the Fed and the ECB were not in any hurry to ease further, it won't be shocking to see the Japanese central bank opt to the sidelines. No action by the Bank of Japan will likely to lead to additional yen strengthening against the U.S. dollar and euro.

9) USD
U.S. Jobless Claims, an important gauge of labor market conditions measuring first-time claims for unemployment benefits, Thurs., Aug. 9, 8:30 am, ET.

Event though jobless claims are forecast to increase to 371K from 365K, a four-week average of 365,500 signals improvement in labor market conditions throughout the month of July.

10) CAD
Canada Employment Situation and Unemployment Rate, the main gauges of labor market conditions measuring job creation and unemployment, Fri., Aug. 10, 8:30 am, ET.

The consensus forecasts point to mixed labor-market data from Canada with the economy expected to add up to 10K jobs in July from 7.3K in June, while the unemployment rate inches higher to 7.3% compared with 7.2% in the previous month. In light of the recent Canadian dollar rally, a weak employment report could trigger profit taking of long CAD positions against the greenback.