This Week's Top 10 Forex Events

The first trading week of June will be light on notable economic data from the United States with a thinner liquidity on Monday and Tuesday as the largest center for foreign exchange in the U.K. will be closed for two days of national holiday. However, four interest rate announcements from the Reserve Bank of Australia, the Bank of Canada, the European Central Bank and the Bank of England, along with the Fed Chairman Ben Bernanke’s testimony in front of the Joint Economic Committee in Washington, DC will provide an interesting insight into the future monetary policies of five of the world’s major central banks.  

In preparation for the new trading week, here is the outlook for the Top 10 economic events that will move the markets around the globe.  

1.    AUD -- Reserve Bank of Australia Interest Rate Announcement: Tues., Jun. 5, 12:30 am, ET.

After the aggressive 50bps rate cut in May, the Reserve Bank of Australia might decide to sit on the sidelines and keep the benchmark rate steady at 3.75%. However, in light of the global economic slowdown, the bank would keep the door open to further rate reductions if conditions deteriorate in the months ahead. Selling pressures on the Aussie dollar will accelerate if there is another unexpected rate cut.  

2.    EUR -- Euro Zone Services PMI:
Tues., Jun. 5, 4:00 am, ET.

The final reading of the euro-zone Services Purchasing Managers Index is expected to confirm the preliminary estimate of 46.5 in May with the index spending another month in contraction territory.

3.    CAD -- Bank of Canada Interest Rate Announcement:
Tues., Jun. 5, 9:00 am, ET.

Acknowledging that the global economy has “slowed markedly” with “significantly less favorable external environment affecting Canada”, the Bank of Canada is not expected to make any changes to its existing accommodative monetary policy and would be likely to keep the benchmark interest rate at the current 1.0% level.

4.    USD -- U.S. ISM Non-Manufacturing Index:
Tues., Jun. 5, 10:00 am, ET.

The U.S. services sector is expected to expand for another month with a reading of 53.7 in May from 53.5 in April, but considering the signs of a weakening economy, we do not exclude the potential for the index to head lower.

5.    AUD -- Australia GDP- Gross Domestic Product:
Tues., Jun. 5, 9:30 pm, ET.

The Australian economy is expected to grow by 0.5% in the first quarter of 2012, compared with 0.4% in Q4 2011. An upbeat GDP report coupled with an improvement in investor sentiment and risk appetite could help the Australian dollar to correct some of its recent losses.

6.    EUR -- Euro-zone GDP- Gross Domestic Product:
Wed., Jun. 6, 5:00 am, ET.

Stronger than expected German growth in Q1 helped lift the overall euro-zone GDP and the revised reading is forecast to confirm that the economy saw 0% growth in the first quarter of 2012, but better than expectations of 0.2% q/q contraction. On the other hand, a downward revision of the Q1 GDP reading would mean a double dip recession in the euro-zone -- a factor that could elevate the pressure on the euro by raising the odds that the European Central Bank will be forced to ease monetary policy in order to stimulate growth.  

7.    EUR -- European Central Bank Interest Rate Announcement: Wed., Jun. 6, 7:45 am, ET.

With euro zone economic growth nowhere to be seen and the future of the euro more and more uncertain with each and every vote from an electorate unhappy about the lack of balance between austerity and growth, the European Central Bank will be forced to ease policy further by buying more bonds, considering LTRO 3, or cutting rates. As the threat of recession looms over the euro zone economy and with the EU debt crisis escalating, either one of the above options looks likely to be deployed soon and neither one will be euro-positive.

8.    AUD -- Australia Employment and Unemployment Rate:
Wed., Jun. 6, 9:30 pm, ET.  

The Australian labor market could raise a red flag with the economy forecast to add only 900 jobs in May from 15,500 in April, while the unemployment rate rises to 5.1% in May compared with 4.9% in the previous month.

9.    GBP -- Bank of England Interest Rate Announcement:
Thurs., Jun. 7, 7:00 am, ET.    

The odds of more QE by the Bank of England have increased significantly in the aftermath of a sequence of weak U.K. economic data coupled with escalating EU debt crisis. Although the bank is expected to keep the benchmark rate at the record low 0.5% and might refrain from announcing additional expansion of its Asset Purchase Program in June, in would not be surprising to see the Monetary Policy Committee pulling the QE trigger in July/August. Risk aversion and QE expectations will continue to weigh on the GBP.

10.    USD -- U.S. Federal Reserve Chairman Testimony:
Thurs., Jun. 7, 10:00 am, ET.

In light of the recent series of negative U.S. economic data, the Fed Chairman will have some explaining to do during his testimony on the economy and monetary policy in front of the Joint Economic Committee in Washington, DC. This will be the first public appearance of the Fed Chairman following yet another disappointing jobs report last Friday. The U.S. dollar will feel the pressure if Mr. Bernanke acknowledges the deterioration in U.S. economic and labor market conditions in the last three months and hints that more quantitative easing could come as early as the Fed’s next meeting on June 19-20.