US Dollar, Japanese Yen to See Slight Event Risk, Low Volumes This Week

• Bank of Japan Monthly Report - December 22
On December 19, the Bank of Japan unexpectedly cut rates by 20bps to 0.10% and increased monthly purchases of government bonds to 1.4 trillion yen from 1.2 trillion yen, which should effectively drive down yields. While BOJ Governor Masaaki Shirakawa has said that the bank isn’t planning on increasing the amount of government debt purchases any further, it is clear that they are very concerned about prospects for growth and the financial markets. The BOJ’s Monthly Report will be important to watch as a gauge of the fundamentals the bank is considering, as the report provides a comprehensive look at the economic indicators of the region.

• New Zealand GDP (Q3) - December 22
Upcoming GDP reports are anticipated to show that the New Zealand economy contracted for the third straight quarter during Q3, at a rate of -0.5%. This is anticipated to be the sharpest decline since Q2 2000 and worst recession since late 1997 - early 1998, as consumer spending falters and the housing sector slows. As it stand, Credit Suisse overnight index swaps are close to pricing in a 75bp cut by the Reserve Bank of New Zealand (RBNZ) on January 29, but if New Zealand GDP falls more than expected, speculation of aggressive rate cuts could rise and weigh on the New Zealand dollar.

• US GDP (3Q F) – December 23
The final round of US GDP readings for the third quarter is not expected to show any revisions upon release at 8:30 ET. Indeed, annualized GDP is forecasted to go unchanged at -0.5 percent, while personal consumption is expected to hold at -3.7 percent. It will likely take a surprisingly low result to illicit any sort of reaction from the markets, as traders are already well aware that economic conditions in the US remain dismal.

• US Personal Spending, Durable Goods Orders (NOV) – December 24
Economic releases due out at 8:30 ET on December 24 are likely to be broadly disappointing and add to indications that the US recession only worsened during Q4. Indeed, personal spending in the US is forecasted to have fallen negative for the fifth straight month in November at a rate of -0.7 percent, while durable goods orders are expected to have dropped 3.0 percent, marking the fourth straight month that demand has either stagnated or declined. Typically, the US dollar would pull back on figures that were weaker-than-expected, but since the trading should be quiet ahead of the December 25 holiday and subsequent global market closures,

• Japanese Industrial Production (NOV P) – December 25
The Japanese economy fell into recession during Q2 and Q3 of 2008, and upcoming data is likely to indicate that it extended into Q4 as well. Industrial production for the month of November is forecasted to fall by 6.8 percent, bringing the annual measure down to a record low of -15.0 percent. Manufacturers are feeling the impact of a slowing in domestic demand, as well as foreign demand, which has only been exacerbated by the rapid appreciation of the Japanese yen. Individual economic releases don’t tend to have a huge impact on the Japanese yen, but this is still an indicator that may be worth watching.

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

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