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Relatively Quiet Week in Terms of Scheduled Event Risk

Relatively Quiet Week in Terms of Scheduled Event Risk

2011-09-26 04:00:00
Christopher Vecchio, CFA, Sr. Currency Strategist
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The past week was tumultuous. The markets were rattled by fears of a Greek default, then by a disappointing Federal Open Market Committee meeting in which the Federal Reserve announced it would not expand the size of its balance sheet, just alter its composition. The decision shattered investor confidence, with equity markets paring around 6 percent in just 24-hours following the announcement. The coming week ahead could see further volatility, though it won’ come from scheduled event risk: with so few data due of high importance, price action will be largely determined by further developments out of Europe regarding the sovereign debt crisis.

USD Consumer Confidence (SEP): September 27 – 14:00 GMT

Consumer confidence is expected to remain below 50.0 after falling below the key level in August. This was the first time the reading came in below 50 since last October. July’s reading was slightly improved from June at 59.5, but the August reading of 44.5 showed a significant deterioration in sentiment. Such an occurrence wasn’t necessarily a surprise, especially given the state of U.S. politics and the downgrade of long-term U.S. government debt in early September. Looking ahead, September’s reading isn’t expected to inspire much confidence either, with a Bloomberg News survey showing a forecast of 46.2.

The worsening debt crisis in Europe is likely to have an increasing effect on consumer confidence, in a ‘trickle-down’ sort of way; as equity markets continue to head lower on contagion concerns, sentiment will deteriorate, despite the fact that the influence is mostly exogenous, at least to American consumers.Join a DailyFX analyst for live coverage of event!

USD Durable Goods Orders (AUG): September 28 – 12:30 GMT

U.S. durable goods orders are expected to have dropped by 0.4 percent after jumping by 4.1 percent in July, a disappointing forecast given the gains made in the prior reporting period. The less volatile ex transportation figure is forecasted to show no growth, after expanding by 0.8 percent in July. If demand is tapering off again and remains low, the U.S. economy will suffer, as consumption represents approximately 70 percent of the aggregate growth figure.It appears that the recent slowdown in consumer spending, not only in America, but abroad as well, is weighing on manufacturing growth in the United States.

Certainly, the global slowdown and European sovereign debt crisis are not helping the issue. A worse-than-expected reading would be bullish for the U.S. Dollar, as it would continue to break investor confidence and thereby boost demand for safety. Join a DailyFX analyst for live coverage of event!

EUR GermanConsumer Price Index (YoY) (SEP P): September 29--:-- GMT

The recent period of relatively higher interest rates set forth by the European Central Bank has certainly alleviated price pressures in the Euro-zone’s largest economy, with an expected consumer price index reading to show the first month of deflation since January. The -0.1 percent month-over-month reading for September, as forecasted, according to a Bloomberg News survey, would maintain the year-over-year inflation rate at 2.4 percent.

With inflation under control, and price pressures starting to abate, coupled with the fact that Europe appears to be on edge of not only a complete financial meltdown, but also another recession as the periphery countries have started to experience sharp declines in growth following recent austerity measures, the European Central Bank could be poised to slash rates in the near future. The markets have already begun to price this scenario in, with the Credit Suisse Overnight Index Swaps showing that 9.0-basis points are priced out of the Euro over the next 12-months.

USD Gross Domestic Product (Annualized) (2Q F): September 29 – 12:30 GMT

The U.S. economy experienced slower economic growth in the second quarter of 2011, the first and second reading showed, with the GDP figure registering a 1.0 percent annualized rate, versus the initial first reading 1.8 percent expectation. The final revision is forecasted to show a 1.2 percent reading upward, a potential brief relief in the recent string of disappointing data out of the world’s largest economy. The data is important given the speculation arising recently that a full-blown recession is on its way, crushing equity markets and risk-correlated assets the past few days. Any glimmer of hope, even a tick higher on the final revision of GDP, could boost risk-appetite momentarily. That being said, a revision downwards of 1.0 percent would not be a surprise.

CAD Gross Domestic Product (YoY) (JUL): September 30 – 12:30 GMT

Canadian gross domestic product data has tailed-off substantially, with the second quarter annualized reading at -0.4 percent. That was a significant decline from the 3.6 percent annualized rate in the first quarter. The negative growth is expected to be trimmed in the next release, when the monthly figure from July is forecast to show 0.3 percent growth on a monthly basis, while the yearly figure is forecasted to print at 2.3 percent, according to a Bloomberg News survey. Global growth is slowing, and Canada, despite their economy which has been relatively insulated from the sovereign debt crisis in Europe, is not immune to such a contraction.

Similarly, with oil falling off a cliff in recent weeks on concerns of a global slowdown, the Canadian Dollar has been negatively impacted. Canada is the number one exporter of oil to the United States, the world’s largest consumer of oil, and thus any concerns over American growth substantially weigh on the Canadian economy.

Rate Hike Probabilities / Basis Point Expectations (12-months)

Relatively_Quiet_Week_in_Terms_of_Scheduled_Event_Risk_body_Picture_1.png, Relatively Quiet Week in Terms of Scheduled Event Risk

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

Written by Christopher Vecchio, Currency Analyst

To contact the author of this report, please send inquiries to: cvecchio@dailyfx.com

Follow Christopher Vecchio on Twitter: @CVecchioFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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