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The main topic of conversation this week will be if the USD can maintain its recent firm stance against the EUR, CAD, CHF and JPY amongst others.

The main contributing factor to the Dollar’s strength was increased speculation that the Fed will raise interest rates at the August FOMC Meeting. According to interest rate futures there is now a 60% chance of at least a 0.25% hike.

The Dollar closed higher on the week against the world’s majors in the face of better than expected retail sales and consumer inflation numbers. However, the data continues to be mixed with Initial Jobless Claims and the University of Michigan Consumer Sentiment both coming in worse than expected.

The US economic schedule for the coming week is a busy one. We begin on Monday with three high volatility events: Empire State Business Conditions Index, TIC Net Long-Term Transactions and Fed Chairman Bernanke’s speech at the Senate Finance Committee Health Reform Summit.

On Tuesday we will see the release of Housing Starts and the Producer Price Index. Both of these events promise to come with a high level of interest attached to them. At the same time we will also see the slightly less important Core PPI, Building Permits and US Current Account data.

Wednesday and Friday promise to be slightly quieter from the point of view of US economic releases. However, high volatility is likely when Fed Governor Kohn testifies before the Senate Subcommittee on Securities, Insurance and Investment. As usual we will also see Initial Jobless Claims. Traders will be keenly watching this data after last week’s 384K, with figures expected to fall slightly to 375K this week.

It is not just the US economic calendar that can set the tone for the trading week. We are due several high volatility events from other sources too.

On Monday we will see the highly anticipated release of the Eurozone Core CPI YoY. This is the benchmark figure that the ECB uses to set interest rates. There is speculation that the ECB will raise rates in the near future in the face of higher inflation. Core CPI is expected to climb to 1.8% and any surprises to the downside could open the door for further EUR shorting.

Further high volatility events this week are as follows:

Tuesday:
RBA Meeting Minutes - 02:30
UK CPI YoY - 09:30
German ZEW Economic Sentiment - 10:00

Wednesday:
BOE MPC Meeting Minutes - 09:30
BOE Governor King Speaks - 19:30

Thursday:
SNB Libor Interest Rate Announcement - 08:30
SNB Monetary Policy Assessment - 09:00
UK Retail Sales - 09:30
Canadian Core CPI - 12:00

Friday:
Canadian Core Retail Sales - 13:30

Visual Analysis

This week the visual analysis tool will be in use for the US PPI, BOE Meeting Minutes and the Canadian Core CPI.

Check out the full economic calendar and economic speeches.

Although this week will be slightly quieter than last, RBA, BOE and FOMC Meeting Minutes promise to take the economic centre stage.

The RBA Meeting Minutes will be the first high volatility event of the week, 02:30 BST on Tuesday 20^th. Australian Interest Rates currently stand at 7.25% with no speculation of any immanent cuts.

Both the BOE Monetary Policy Committee and the Federal Open Market Committee Meeting Minutes will be released this Wednesday, May 21^st. The BOE will come first, at 09:30 London time with the Fed following at 19:00 BST. As you might expect, these events will draw heavy interest from traders and economists with high market volatility expected. The markets are firmly focused on whether either central bank sees the need for further near term interest rate cuts.

Specifically, traders will watch the MPC Member vote split from the last meeting. The decision was taken to keep the rate on hold at 5.00% and the weight of the majority decision will be watched very closely for clues to the pace and direction of future rate moves.

While the FOMC does not reveal any vote casting it does publish a detailed summary of the interest rate meeting. Traders will closely scrutinize this commentary for clues to future rate moves. At present the popular market opinion is that the US will leave rates on hold in the near term.

Prior to the data landing on Wednesday we will see US PPI and Core PPI. They will hit the wire on Tuesday at 13:30 London time, 08:30 EST. The raw Producer Price Index carries more weight than the Core release. Economists are expecting 0.4% MoM for the PPI and 0.2% for the Core reading.

Later in the week we will see more high-volatility events from the US and UK. On Friday we will see the UK GDP Second Estimate which is expected to come in unchanged at 0.4%. This will be followed at 15:00 BST by US Existing Home Sales. Following a modest but unexpected increase to 5.03 million units in the March announcement, economists are expecting a second straight monthly decline to 4.86 million.

Further high volatility events this week are as follows:

BOJ Press Conference following the BOJ Interest Announcement - Tuesday am
Swiss PPI MoM - Tuesday 08:15
German ZEW Economic Sentimant - Tuesday 10:00
German Ifo Business Climate Index - Wednesday 09:00
Canadian Core CPI - Wednesday 12:00
UK Retail Sales - Thursday 09:30
Canadian Core Retail Sales - Thursday 13:30

The trading week is slightly shorter than normal in Canada (Victoria Day, Monday 19^th) and Germany (Corpus Christi, Thursday 22^nd) with lighter volume and volatility expected during these trading sessions. For more info please see our 2008 market holiday calendar.

The Passion-Trading visual analysis and historical data tool will support the following releases this week:

US PPI MoM
BOE MPC Meeting Minutes
Canadian Core CPI MoM
US Existing Home Sales

For details on the scheduled economic speeches you can check out this week’s economic comment calendar.