US Dollar Range Could Break on US Retail Sales, CPI, or Consumer Confidence

•    Australian Employment Change (DEC) – January 13, 19:30 ET
Like US non-farm payrolls, the Australian employment change can be market-moving for the nation’s currency due to the fact that actual results tend to differ from expectations. For the month of December, the employment change is projected to rise for a fourth straight month, this time by 10,000. At the same time, the unemployment rate is projected to rise to 5.8 percent from 5.7 percent, due primarily to an increase in the participation rate. With the markets still pricing in just over 128 basis points worth of rate hikes by the Reserve Bank of Australia over the next 12 months, a surprise decline could put a dent in rate expectations, as well as the Australian dollar. On the other hand, further gains in the labor markets could add to the currency’s renewed strength and push AUDUSD to or above the 2009 highs of 0.9404.

•    European Central Bank Rate Decision – January 14, 7:45 ET
The European Central Bank is anticipated to leave rates unchanged at 1.00 percent at 7:45 ET. Where the currency ends the day, though, may have more to do with what ECB President Jean-Claude Trichet says during his post-meeting press conference at 08:30 ET. Traders will likely focus on any comments regarding the future of interest rates in the region, including statements on exit strategies for the central bank’s liquidity programs, the economic outlook, and how they may deal with Greece’s fiscal problems (if at all). At the time of writing, Credit Suisse overnight index swap rates were pricing in 100 basis points worth of hikes by the ECB over the next 12 months, but indications that the central bank foresees a quicker recovery in growth or inflation could push these expectations, and the euro, higher.

•    US Advance Retail Sales (DEC) – January 14, 8:30 ET
The upcoming release of US advance retail sales for December is projected to show that consumption rose for a third month, this time by 0.5 percent. However, given recent reports that retail sales at stores like Sears, Target, and Bed Bath & Beyond rose more than expected during the holiday season suggests that there is potential for the government’s figures to surprise to the upside. That said, this sort of news may already be priced into the market, and the bigger question going forward is if consumption will be able to gain much further in light of Friday’s US non-farm payrolls report, which showed that the economy lost another 85,000 jobs in December.

•    US Consumer Price Index (CPI) (DEC) – January 15, 8:30 ET
The start of 2010 has brought about rumblings that stagflation – little to no growth along with greater inflation – will be the main theme in the US economy this year. These concerns could be exacerbated by the upcoming release of the US consumer price index (CPI) for the month of December. CPI is projected to rise a slight 0.2 percent on a monthly basis, but the annual rate is anticipated to surge to a 14-month high of 2.8 percent from 1.8 percent. On the other hand, the annual rate of core CPI (excludes items like energy and food) is projected to edge up to 1.8 percent from 1.7 percent, suggesting that any price growth is the result of volatile costs like oil, rather than a broad increase in demand. Nevertheless, higher than expected headline and core CPI figures have the potential to lead the US dollar higher as the markets will shift to price in rate hikes by the Federal Reserve later this year.

•    US University of Michigan Consumer Confidence (JAN P) – January 15, 9:55 ET
The preliminary reading of the University of Michigan’s consumer confidence index is forecasted to improve for a second month in January by rising to a two-year high of 74.0 from 72.5. That said, it’ll be interesting to see if the index can hold at such robust levels given the latest labor market figures, which showed that the economy lost 85,000 jobs in December. The major issue we want to point out with this report is that the official time of release is 10:00 ET, but it typically hits the wires at 9:55 ET, which can exacerbate any surprise factor from the actual results.

See the DailyFX Calendar for a full list, timetable, and consensus forecasts for upcoming economic indicators.

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