Trading Week Outlook: Feb. 13 - 17

The euro will keep its center stage spot in the week ahead which will shed light on Euro-zone economic growth (or the lack thereof) in the final quarter of 2011. The Greek drama continues with an impending parliamentary vote on new austerity measures and bailout funding approval desperately needed at the Eurogroup meeting of finance ministers scheduled for February 15.

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 GDP- Gross Domestic Product, the main measure of economic activity and growth, Sun., Feb. 12, 6:50 pm, ET.

After registering its third recession in a decade in Q1 and Q2, the Japanese economy returned to growth by 1.6% q/q in the third quarter of 2011, but is forecast to lose momentum once again, contracting by 0.3% q/q in Q4 2011.

2. JPY- Bank of Japan Interest Rate Announcement, Mon., Feb. 13, around 11:00 pm, ET.

The Bank of Japan is expected to stay accommodative and to keep its record low benchmark rate in the target band between 0% and 0.10%. With economic conditions deteriorating and the yen not far from record highs against the USD and the EUR, there is a strong potential for the Japanese central bank to consider additional measures to stimulate the economy and to weaken its currency.

3. GBP- U.K. CPI- Consumer Price Index, the main measure of inflation preferred by the Bank of England, Tues., Feb. 14, 4:30 am, ET.

Inflationary pressures in the U.K. are forecast to continue their decline with the inflation gauge dropping to 3.6% y/y in January from 4.2% y/y in the previous month. Lower inflation would make the Bank of England’s policy makers more comfortable with a decision to expand the size of the quantitative easing program even beyond the additional 50 billion pounds announced last week.

4. EUR- Euro-zone ZEW Economic Sentiment Index, a leading indicator of economic conditions and business expectations, and Industrial Production, the main measure of industrial activity, Tues., Feb. 14, 5:00 am, ET.

The trend of improvement in the ZEW index is forecast to continue with the economic sentiment index in the Euro-zone registering a smaller decline of -21.1 in January from -32.5 in December. However, it would not be the same for the Euro-zone industrial production as the manufacturing output drops by 1.1% m/m compared with -0.1% m/m in the previous month.

5. USD- U.S. Retail Sales, an important gauge of consumer spending measuring sales at retail establishments, Tues., Feb. 14, 8:30 am, ET.

Consumer spending in the U.S. is forecast to improve from the weaker than expected 0.1% m/m reading in December with a 0.8% m/m increase in January.

6. GBP- U.K. Jobless Claims and Unemployment Rate, the main gauges of employment trends and labor market conditions, Wed., Feb. 15, 4:30 am, ET.

First-time claims for unemployment benefits in the U.K. are forecast to increase by up to 3,300 from 1,200 in the previous month, while the unemployment rate remains unchanged at 8.4%.

7. EUR- Euro-zone GDP- Gross Domestic Product, the main measure of economic activity and growth, Wed., Feb. 15, 5:00 am, ET.

A few months ago, the ECB President warned about the potential for a “mild recession” in the Euro-zone. The GDP data could prove that Mario Draghi’s concerns were justified with the economy forecast to contract by 0.4% q/q in the fourth quarter of 2011 after an anemic growth of 0.1% q/q in Q3. A disappointing GDP report would raise the odds of more rate cuts by the European Central Bank and could weigh on the euro.

8. GBP- Bank of England Inflation Report, the central bank’s official assessment and outlook on inflation and economic conditions, Wed., Feb. 15, 5:30 am, ET.

With inflationary pressures subsiding in recent months exactly in line with the Bank of England’s forecast, the bank is expected to maintain its outlook for lower inflation while policy makers keep their cautious stance on the U.K. economy. The inflation report, coupled with the U.K. CPI and jobs data, could become significant risk events for the GBP.

9. USD- U.S. FOMC Meeting Minutes, a comprehensive record of the Fed’s meeting offering the central bank’s outlook on the economy and future monetary policy, Wed., Feb. 15, 2:00 pm, ET.

Following the surprisingly dovish FOMC monetary policy announcement, the minutes should confirm the market’s expectations that the Fed is standing ready to deploy QE3 at the first signs of economic and labor market weakness. As long as QE3 remains a viable option, the USD would continue to feel the pressure.

10. USD- U.S. Housing Starts, a leading indicator of housing market activity measuring construction of new residential properties, Thurs., Feb. 16, 8:30 am, ET.

The U.S. housing starts are forecast to improve from December’s decline to 660K with an increase to 680K in January, while building permits also inch higher to 680K from 670K in the previous month.