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Last week was characterised by a rapid appreciation in the value of the US Dollar. However, this wasn’t due to improving economic conditions in the US as much as confirmation of deterioration in other countries. The dollar also took strength from falling commodity prices.

The currencies worst hit against the Greenback were the UK Pound, Euro, Canadian Dollar and Australian Dollar. The GBPUSD made a new 21-month low, the EURUSD has its sharpest fall in 3 years, the AUDUSD extended its longest loosing streak since 1980 and the CADUSD had its biggest weekly rally since 1971.

The UK, Eurozone and Australia all kept interest rates on hold last week. Australia sighted economic slowdown in a statement that left the way open for a rate cut at the RBA’s next meeting while the Eurozone conceded that there was no monetary policy bias, thus killing any hopes of further rate hikes from the ECB.

The Canadian Dollar suffered from a poor labor report. Employment Change came in at -55K as opposed to the +5K expected.

The coming week is very busy with a host of high volatility events expected once again. We begin on Monday morning with the RBA Monetary Policy Statement. Traders will be looking at this to confirm the chance of a rate cut at the next interest rate meeting. We also have UK PPI Input at 09:30 with expectations of 1.0% MoM growth for July. Heading into the US trading session we have Canadian Housing Starts at 13:15. Last week we saw Canadian Building Permits fall by more than expected at -5.3% MoM with Housing Starts also expected to fall slightly from 218K in June to 210K for July.

Tuesday will bring the latest round of inflation data from the UK with the Consumer Price Index (CPI) YoY watched very closely. Economists are expecting the YoY figure to rise to 4.1%. Later on Tuesday we will see high volatility for the US and Canadian Trade Balance releases. US Trade Deficit is expected to widen from 59.8B to 61.8B while Canadian Trade Surplus should increase slightly to 5.7B from 5.5B.

We continue on Wednesday with the Japanese preliminary GDP. This is a quarterly calculation with GDP expected to show contraction of 0.6% from growth of 1.0% in the previous quarter. UK Claimant Count Change is also due with an extra 17.5K expected to have claimed unemployment benefit in July. There is an economic report from the BOE due at 10:30. The BOE Inflation Report follows yesterday’s CPI news. The next round of high volatility data from the US comes at 13:30 with Core Retail Sales and Retail Sales hitting the wire. The Core number is expected to show 0.5% growth MoM while the raw number will probably be flat at 0.0% MoM.

Thursday will be typically busy with high volatility from the Eurozone, US, Canada and New Zealand. First up is German Preliminary GDP QoQ. GDP is expected to have contracted by 0.8% after 1.5% growth in the previous quarter. Trichet spoke last week of a “technical correction” in GDP and this would be the first evidence of that. At 10:00 Eurozone CPI YoY is due with a number of 4.1% widely expected. Next is US Core CPI MoM. A reading of 0.2% is expected after 0.3% growth in June. The Bank of Canada will add to the excitement on Thursday with its Summer Quarterly Review. Traders will be particularly interested to see how the BOC explains Canada’s economic performance over recent months. Data from New Zealand will be of high importance with Core Retail Sales and Retail Sales due. Both numbers are expected to post a MoM decline with -0.8% and -1.6% anticipated respectively.

Friday will round off the week with two more high volatility events. First is the latest round of Treasury International Capital (TIC) Net Long-Term Transactions data. It is expected that 55.0B of foreign investment came into the US long-term securities market last month from 67.0B the month before. Also due is the preliminary University of Michigan Consumer Sentiment with a number of 62.0 expected.

Visual Analysis and Historical Data

In the up coming week the visual analysis and historical data tool will support the US Core CPI release.

This week the US Dollar will look to recover from losses sustained on Friday due to mortgage market worries and new record high oil prices.

The Dollar was sold off because of concerns that losses at Fannie Mae and Freddie Mac may spiral out of control and see the lenders nationalized. The big winner from the news was the Australian Dollar, hitting fresh 25-year highs against the Greenback.

Oil was driven higher (above $147 a barrel) on speculation that Israel may attack Iran. This helped the Canadian Dollar recover from much worse than expected employment data. The Canadian Labor market shed 5K jobs in June while it was expected to create 10K. This contributed to an increase in the Unemployment Rate from 6.1% to 6.2%.

This week we have a jam packed economic calendar with high volatility events right from the off. We begin the week on Sunday night with Core Retail Sales and Retail Sales from New Zealand. The Core number is expected to increase by 0.5% MoM while Retail Sales are expected to moderate by 0.1% on a monthly basis.

Monday: On Monday morning the main focus will be UK PPI Input MoM. The monthly rate is expected to come in at 2.5%, less than last month's 3.8%. However, this will still see the YoY number climb to 28.9%.

The rest of the London and New York sessions will be fairly quiet with Industrial Production from the Eurozone and the Fed Governors open meeting and vote on mortgage rule changes.

At 23:45 Monday night we will see further high impact data from New Zealand. This time it is the CPI QoQ. Growth in the Consumer Price Index is expected to climb to 1.4% QoQ.

Tuesday: Tuesday promises to be a busy day with high volatility events from the UK, Australia, Japan, Eurozone, US and Canada. We begin the day at 00:01 with the UK's RICS House Price Balance.  This survey measures the percentage of chartered surveyors reporting a reduction in house prices in their area. The market is anticipating that 93.8% of respondents will register a price drop. At 09:30 we will see the UK CPI with the YoY rate expected to climb to 3.6% pushing the data further above the BOE's 2.0% threshold. Not surprisingly Core CPI is expected to remain at 1.5% indicating that food and energy costs remain the main driving factors of consumer inflation.

At 02:30 the RBA will release the minutes from their last Interest Rate Meeting. Traders will be interested to see the RBA's views on slowing economic growth and the chances of any more interest rate hikes in the near future. The Australian Dollar has been trading at or near 25-year highs against the US Dollar for some time now in the face of strong commodity prices and a favourable interest rate gap.

Japanese Yen traders will be focussed on the Interest Rate Announcement and the accompanying BOJ Press Conference. With interest rates expected to remain steady at 0.50% more focus will fall on the press conference. Traders will be keen to see if the BOJ expects economic growth to remain relatively flat. It is expected that interest rates will remain at 0.50% for the foreseeable future.

Although the Euro is likely to react more to data from the US than its own economic data there is one high volatility release due. The German ZEW Economic Sentiment  will probably fall again to -55.5.

It will be a busy day in the US with Core Retail Sales, Retail Sales and PPI at 13:30 followed by Bernanke's Testimony to the Senate Committee on Banking, Housing and Urban Affairs at 15:00. Retail Sales are expected to moderate slightly from May's impressive growth with the Core figure expected at 0.9% and Retail Sales at 0.4%. Elsewhere PPI is expected at 1.3% MoM, down from the 1.4% growth in May.

Canada will join Japan in making its latest Interest Rate Statement. Rates are expected to remain on hold at 3.00% but with the BOC's bias towards cutting rates traders will be on the lookout for any surprise cuts. The rate statement will also be closely scrutinised for changes in the language that may indicate rate moves in the months to come.

Further high volatility events for the week are as follows:

Wednesday:
04:05 RBA Governor Stevens Speaks
09:30 UK Claimant Count Change
10:00 Eurozone CPI YoY
13:30 US Core CPI MoM
14:00 TIC Net Long-Term Transactions
15:00 Bernanke Testifies before the House Committee on Financial Services
19:00 FOMC Meeting Minutes

Thursday:
BOC Monetary Policy Report
BOC Governor Carney Speaks

Visual Analysis and Historical Data
This week the visual analysis and historical data tool will support the US PPI and US Core CPI data releases.

The GBPUSD currency pair promises to be in focus this week as the UK and US both have busy economic release schedules

On Monday we will see PPI Input and Trade Balance data from the UK at 09:30. Both of these releases are regarded with maximum importance. Economists are expecting PPI Input to come in at 1.8% MoM. The index is important because it assumes that the manufacturing sector will look to pass on increasing costs to the consumer. Elevated Producer Inflation has been caused by an increase in fuel and commodity prices and the impact of a softening Pound. PPI Output is also set to be released at the same time although this is slightly less important to the market.

The UK Trade Balance, released by The Office for National Statistics, is expected to narrow slightly to -7.5 billion pounds from an expected revision of -£7.6 bln in February.

This Tuesday (13^th) will be equally as busy. Just after midnight UK time, the RICS House Price Balance will be released. Economists are expecting 80% of mortgage surveyors polled to report house prices falling in their area from the 78.5% last month.

At 09:30 the highly anticipated UK Consumer Price Index will be released. Traders will be most interested in the CPI YoY because it is the benchmark reading that the BOE uses in its monetary policy considerations. The CPI is expected to increase to 2.6% from a previous reading of 2.5%. Core CPI is also expected to increase from 1.2% to 1.3%

After a quiet Monday, the first high volatility news from the US will be released on Tuesday. The action starts at 13:20 with Fed Chairman Bernanke’s speech at the Atlanta Fed’s Financial Markets Conference. Then, at 13:30 (08:30 EDT) Retail Sales and Core Retail Sales are due. Retail sales are expected to decrease MoM by -0.2%, however the core number is set to rise by 0.2%.

Later in the week we will see the further action from the UK and US with BOE Quarterly Inflation Report (Wednesday @10:30), US Core CPI MoM (Wednesday @ 13:30), Empire State Business (Manufacturing) Conditions Index (Thursday, 13:30), TIC Net Long-Term Transactions (Thursday, 14:00), Fed Chairman Bernanke speaking at the Chicago Fed’s annual convention (Thursday, 14:30), Philadelphia Fed’s Manufacturing Index (Thursday, 15:00) and finally Michigan Consumer Sentiment at 14:55 on Friday.

Outside of the US and UK this week the following high volatility events are scheduled:

NZD – Retail Sales MoM, Wednesday @ 23:45
NZD – PPI Input MoM, Thursday @ 23:45
JPY – Preliminary GDP QoQ, Friday @ 00:50

Economic Speeches and Comments

As usual there are a number of key comment and events to be aware of, especially from the US. The Atlanta Fed’s Financial Markets Conference dominates the first part of the week with no less than 3 Federal Reserve officials speaking on Tuesday. The market will focus on Bernanke’s comments at 13:20 with Warsh and Plosser participating in discussions later in the day.

Bernanke is also due to speak at the Chicago Fed’s Annual Conference on Bank Structure and Competition on Thursday, 14:30. This is also a high profile event as Bernanke’s comments focus on “Risk Management at Banking Organizations”.

Full details can be found at this week’s speech and comment calendar.

Also this week, the visual analysis and historical data tool is available for Core US CPI.