Top 10 Forex Events Outlook: Week Of August 20-24, 2012

With Prime Minister Samaras hitting the road to meet with EU leaders and expected to request an extension of his country’s austerity program, the week ahead will see Greece returning to the forefront of the debt crisis, while data from the eurozone could deliver more signs of deteriorating economic conditions.

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. JPY- Japan Trade Balance of the difference between imports and exports, Tues., Aug. 21, 7:50 pm, ET.

The alarming trend of rising trade deficit is forecast to make a comeback with a reading of -272 billion yen in July, compared with a surplus of 61.7 billion in the previous month. The report could raise the odds that the Bank of Japan will be forced to expand the size of its quantitative easing operations and could weigh on the yen.

2. 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, Wed., Aug. 22, 10:00 am, ET.

After the disappointing 5.4% drop in June, sales of existing homes in the U.S. are expected to rise by 3.0% to 4.52 million in July, but still far from levels that spell a recovery in the housing market.

3. USD- U.S. Federal Open Markets Committee Meeting Minutes, a detailed record of the Fed’s latest meeting providing an outlook on the economy and future monetary policy, Wed., Aug. 22, 2:00 pm, ET.

Although the FOMC decided to sit on the sidelines at its previous meeting, the minutes could put some pressure on the USD as they would be likely to remind traders that QE3 is not completely out of the picture and that the Fed will be willing to deploy it if economic conditions deteriorate further. On the other hand, the latest sequence of economic data has managed to demonstrate resilience in the U.S. economy reducing the odds of a QE3 announcement at the next Fed meeting on September 13.

4. EUR- Germany Manufacturing and Services PMI- Purchasing Managers Indexes, two leading indicators of economic conditions measuring activity in the manufacturing and services sectors, Thurs., Aug. 23, 3:30 am, ET.

Economic activity in the eurozone’s largest economy is not expected to impress with forecasts pointing to a slight increase in the manufacturing index to 43.6 in August from 43.0 in July, while the services index declines to 50.2 in August compared with 50.3 in the previous month.

5. EUR- Eurozone Composite PMI- Purchasing Managers Index, a leading indicator of economic conditions measuring activity in the manufacturing and services sectors, Thurs., Aug. 23, 4:00 am, ET.

With the euro-zone manufacturing and the services indexes expected to stay below the 50 boom/bust line, the composite index is forecast to remain in contraction territory for yet another month at 46.5 in August. The report could weigh on the EUR by heightening the probability of more easing by the European Central Bank as early as its next meeting on September 6.

6. USD- U.S. Jobless Claims, an important gauge of labor market conditions measuring first-time claims for unemployment benefits, Thurs., Aug. 23, 8:30 am, ET.

The jobless claims data in the last 6 weeks has demonstrated a trend of improvement in labor market conditions with an average around 365K. This is the area where first-time claims for unemployment benefits are expected to stay as the consensus forecasts point to a slight decline to 365K from 366K in the previous week. If this promising trend continues, the USD should be able to benefit from reduced QE3 odds.

7. USD- U.S. New Home Sales, an important gauge of housing market activity measuring sales of newly constructed homes, Thurs., Aug. 23, 10:00 am, ET.

Sales of new homes in the U.S. are forecast to increase to 365K in July compared with 350K in the previous month.

8. EUR- Greece Prime Minister Meeting with the German Chancellor, Fri., Aug. 24, all day event.

Following a relatively quiet month of August, the meeting of the Greek Prime Minister Antonis Samaras with the German Chancellor Angela Merkel could mark a new phase in the EU debt crisis and could increase market jitters a few weeks before the Troika of inspectors return to Greece in September. A recent report by Financial Times cited a document confirming that “the Greek government is seeking a two-year extension of its latest austerity programme.”

According to the document, the Greek Prime Minister is expected to outline the proposal during his meetings throughout the week with the Eurogroup Chairman on Wednesday, the German Chancellor on Friday, and the French President on Saturday. Last week, two cabinet members said that Angela Merkel is “considering easing Greece’s bailout terms.” However, with German voters growing unhappy about paying for irresponsible governments, the German parliament not willing to support another restructuring of Greece’s bailout terms, and without a final word from the three creditors (EU, IMF and European Commission) uncertainty should elevate anxiety levels, keeping the EUR under pressure.

9. GBP- U.K. GDP- Gross Domestic Product, the main measure of economic activity and growth, Fri., Aug. 24, 4:30 am, ET.

The U.K. economy is experiencing its first double dip recession in 30 years with three consecutive quarters of negative economic growth. Despite of the anticipated upward revision to -0.5% q/q from a preliminary estimate of -0.7% q/q, the Q2 2012 GDP report will do little to assure the markets that U.K. economic conditions are improving.

10. USD- U.S. Durable Goods Orders, a gauge of industrial activity measuring orders for durable goods placed with domestic manufacturers, Fri., Aug. 24, 8:30 am, ET.

In a sign that economic activity in the world’s largest economy is picking up, orders for durable goods in the U.S. are forecast to increase by 2.8% m/m in July compared with 1.3% m/m in June.