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This week promises to be a very busy one with no less than four central banks due to release interest rate decisions. For what it’s worth, all four banks are expected to remain on hold but traders do see a small chance that the RBA may cut rates now ahead of the more widely expected cut in September.

We begin the week with a high volatility event from New Zealand on Sunday night. Unit Labour Costs are expected to show a 0.8% increase QoQ.

On Tuesday morning we have the first of our scheduled interest rate statements, which comes from the RBA. Rates currently stand at 7.25% and the majority of economists expect the RBA to stay on hold however some are not as convinced. A string of recent weak economic data from Australia has caused the market to price in a quarter percent drop by the end of the year at least. At this point it would seem likely that the RBA will use the statement to put forward the case for an interest rate cut, essentially preparing the market for the following month.

Tuesday morning’s London session will be busy with three high volatility events due from the UK. First of all the Halifax House Price Index is expected to show a monthly decrease of 1.5% in the cost of UK homes. This economic release date is tentative and could fall at any time over the next week. At 09:30 Manufacturing Production MoM and Services PMI will be released. The UK manufacturing sector is expected to respond modestly to a 0.5% decrease in value of manufacturing output in June with a 0.1% increase in July. Services PMI is expected to drop to 46.7 from 47.1, a number which still shows contraction in the Services industry.

Also on Tuesday we have the ISM Non-Manufacturing Composite. The number is due to show contraction with 48.6 expected. Later on in the NY session is the FOMC Interest Rate Statement. Rates currently stand at 2.00% with no move expected. High volatility is likely with traders still anticipating a rate hike if anything.

Following on from the RBA Interest Rate Statement the previous day we will see Australian Home Loans early Wednesday morning. The number is expected to drop by 2.1% MoM after a 7.9% fall in June. Also due on Wednesday at 15:00 is the Canadian Ivey PMI. This is a broad economic indicator because it surveys all sectors of the economy. The indicator is expected to come in at 62.0 after a 69.6 June reading. Rounding up Wednesday we have high volatility news from New Zealand. Employment Change and Unemployment Rate will be released with 0.1% and 3.8% expected respectively.

On Thursday we will have the last two interest rate announcements but prior to this we will see employment data from Australia. Employment Change and Unemployment Rate are both due with the Australian economy expected to have added 4K jobs in July. Despite this increase in jobs, unemployment is expected to have increased to 4.3%. At midday we have the BOE Interest Rate Statement. Rates are expected to remain on hold at 5.00%. Traders will be interested in the wording of the statement with the BOE expected to sight rising inflation and a flagging economy in their decision the keep rates where they are.

At 12:45 the ECB Interest Rate Announcement is due. The rate is expected to remain on hold in the face of high inflation (the CPI Flash Estimate released last week showed a 4.1% annual rate). However, economists are becoming increasingly sceptical of the Eurozone’s economic strength. A large amount of attention will be paid to the ECB press conference that follows the rate announcement. Traders will be looking for clue to future moves with Trichet expected to maintain that inflation will come under control towards the end of the year. Spain’s Solbes has commented in recent days that he expects to see 4% inflation by the end of the year, pending oil price stabilisation.

The afternoon session will see high volatility construction events from Canada and the US. At 13:30 (the same time as the ECB Press Conference) Canada will release its Building Permits figures. The number is expected to fall by 1.0% MoM. At 15:00 we will see US Pending Home Sales. It is believed that this number is more forward looking than Existing Home Sales and high volatility can be expected. A drop of 1.0% is expected following a MoM decrease of 4.7% in the previous month.

Rounding up the week on Friday we have a quieter day in store. There are two high volatility events due from Canada, both of which showcasing Canadian employment health. Employment Change is expected to follow a decline of 5.0% in June with an increase of the same number for July while the Unemployment Rate should hold firm at 6.2%.

This week the market awaits commentary from Fed speakers, including Bernanke, regarding future monetary policy. Economists are interested to see whether the Fed sees inflation as more of a risk than a weak economy ahead of future interest rate meetings. The question remains: can the US economy survive an inflation fighting rate hike without falling into recession.

This comes on the back of comments last week from the ECB. The Eurozone increased interest rates to 4.25% last Thursday but stated that they don’t expect any future need for further hikes. This resulted in ‘buy on rumour sell on fact’ trading in the EURUSD. Post data the currency pair fell from 1.5908 to a Thursday low of 1.5681.

Early focus in the new week will be on the reaction from US traders following the dismal US Labor market data. Non-Farm Employment Change was in negative territory once again (-62K), Unemployment Rate remained at 5.5% and Initial Jobless Claims climbed above 400K for the second time this year. US markets were closed on Friday for the Independence Day Holiday so it will be interesting to see how traders digest the news after the long weekend.

Monday, Tuesday and Wednesday this week will see a 3-day G8 meeting in Hokkaido, Japan. The meeting is expected to be dominated by climate change, food and commodity prices. There have been pre-meeting comments from Japan and the US blaming a weak US Dollar for inflated energy prices. Traders are waiting to see if G8 members’ comments are strong enough to support a dollar rally on speculation of central bank intervention.

In other news this week, high volatility economic data from the US takes a bit of a breather. The main events will be Fed Chairman Bernanke speech at 13:00 on Tuesday and his testimony before the House of Representatives Committee on Financial Services on Thursday at 15:00. Traders will be looking for hints as to the Fed’s concern over inflation.

The US is also due Pending Home Sales at 15:00 on Tuesday, Initial Jobless Claims at 13:30 on Thursday (more volatility than usual is expected due to the +400K reading last week) and the Trade Balance and Preliminary Michigan Sentiment at 13:30 and 14:55 respectively. The only data that is expected to show any improvement is Initial Jobless Claims where a slight moderation to 397K is expected.

Elsewhere the Canadian economy steels the spotlight with no fewer than five high volatility releases due. Monday will see Building Permits (13:30) and the BOC Business Outlook Survey (15:00). Following this we will see Employment Change and Unemployment Rate at 12:00 and the Canadian Trade Balance at 13:30 on Friday.

Additional high volatility events this week are as follows (all times are UK DST):

Monday
UK Industrial Production (09:30)
NZIER Business Confidence (23:00)

Tuesday
Halifax House Price Index (NTS)

Wednesday
Australian Home Loans (02:30)

Thursday
Australian Employment Change (02:30)
Australian Unemployment Rate (02:30)
BOE Interest Rate Statement (12:00)

The ECB Interest Rate Announcement and US Non-Farm Employment Change look set to dominate this week's economic calendar with much volatility expected.

Last week we saw Dollar negative sentiment drag the greenback lower against the majors. This was after the FOMC seemed to distance itself from the need for an urgent rate hike. It seems that the negative pressure on the economy outweighs the need for commodity inflation controlling rate increases. Interest rate futures reacted accordingly with only a 25% chance of a rate hike in August (down from 40%).

Therefore, it stands to reason that this weeks NFP report will be very closely watched. We have been seeing US labor conditions deteriorate recently with a contraction in payrolls, a steadily rising trend in the number of Initial Jobless Claims and a rapid increase to 5.5% Unemployment Rate.  If the US labor market fails to show signs of improvement this week, and few economists are expecting that it will, then further US Dollar weakness is likely. The Non-Farm Employment Change, Unemployment Rate and Average Hourly Earnings data releases have all been moved to Thursday July 3rd because of the US Independence Day holiday on Friday July 4th.

Also due on Thursday is the ECB Interest Rate Announcement. Rates are expected to increase from 4.00% to 4.25% as the ECB looks to counteract increasing inflation. With the CPI Flash Estimate expected to increase to 3.9% YoY (release on Monday June 30th at 11:00 CET) the hike is almost a done deal. As usual traders will be watching the ECB commentary at the press conference held later in the day. It is due to take place at the same time as the US labor releases so extreme volatility is expected.

Elsewhere we have a busy week in store for the CAD, NZD, GBP and AUD.

Trading in the Canadian Dollar will be influenced by oil prices and also Gross Domestic Product (GDP) and the Ivey PMI. The latter may see slightly less volatility than normal as it falls on the US holiday. The week will be cut slightly short in Canada too because of the Canada Day holiday on Tuesday July 1st.

High volatility will be seen in the New Zealand Dollar at the beginning of the week with Building Consents and Business Confidence both due to hit the wire. Trading in the NZDUSD is likely to be dominated by US data arriving later in the week however.

The GBP benefited last week from BOE comments about inflation. This week we will see Nationwide House Prices, Manufacturing PMI, the Halifax House Price Index and Services PMI from the UK. Each of these releases is expected to create high market volatility.

Volatility in the Australian Dollar will benefit this week from the releases of the RBA Interest Rate Statement (expected to remain on hold at 7.25%), Building Approvals, Retail Sales and Trade Balance data.

This week's high volatility events are as follows (all events are London time, UK DST, GMT+1):

Sunday: New Zealand Building Consents (23:45)
Monday: New Zealand Business Confidence (04:00)
Canadian GDP (13:30)
Tuesday: Japanese Tankan Large Manufacturers Index (00:50)
RBA Interest Rate Statement (05:30)
Nationwide House Price Index (07:00)
UK Manufacturing PMI (09:30)
US ISM Manufacturing Prices (15:00)
Wednesday: Australian Building Approvals (02:30)
Australian Retail Sales (02:30)
US ADP Non-Farm Employment Change (13:15)
Thursday: Australian Trade Balance (02:30)
Swiss CPI (06:45)
Halifax House Price Index (NTS)
UK Services PMI (09:30)
ECB Interest Rate Announcement (12:45)
ECB Press Conference (13:30)
US Non-Farm Employment Change (13:30)
US Unemployment Rate (13:30)
US ISM Non-Manufacturing Composite (15:00)
Friday: Ivey PMI (15:00)