Financial markets around the world go full steam ahead this week after two-weeks of holiday disruption. Traders will be returning to their desks in time for major economic data releases from the US, UK, Canada, Australia and New Zealand so it promises to be a busy week.

This Week
The high volatility doesn’t get started until Tuesday with the Nationwide House Price Index at 07:00. The index is expected to show that house prices contracted by 1.5% in December compared to the -0.4% seen in November.

At 09:30 we will see the Services PMI for the month of December from the UK. The index currently stands below the expansion/ contraction zone registering a 40.1 in November. Economists are expecting further deterioration to 39.0 in December.

US high volatility is due at 15:00 with two releases expected. The ISM Non-Manufacturing PMI probably contracted further in December to 36.8 from 37.3 one month previous. Pending Home Sales, also due at 15:00, are likely to show a 0.8% contraction for the reporting period of November. This follows on from October’s -0.7 percent.

One of the most highly anticipated events of the week is due at 19:00 with the release of the FOMC Meeting Minutes. The minutes are from the Fed’s December 16th 2008 meeting where the decision was taken to cut the Federal Funds Rate from 1.00% to 0.25%. Traders will be looking for an insight into the decision and any indication that rates may be cut further to 0.00%.

At 21:45 the New Zealand Trade Balance will be announced. The data is for the month of November and is expected to show a contraction in the trade deficit from 942M to 838M NZD.

Wednesday will be slightly quieter with two high influence economic announcements due. At 00:30 the Australian Retail Sales Trend number for November will be released. A consensus estimate is yet to be released, however we are following on from a 0.2% MoM increase in October.

At 13:15 GMT we have the first of the week’s significant employment data. ADP Non-Farm Employment Change is expected to show 450K jobs were lost in December, following on from a revised number of -472K in November.

Thursday begins with high volatility from Australia. Building Approvals and Trade Balance data are both due at 00:30. Building Approvals for November are expected to show a 1.3% decline after a fall of 5.4% in October. Australia’s trade surplus is expected to have decreased slightly in November to AUD 2.15B, down from 2.95B the month before.

Later in the day we will see the BOE Interest Rate Statement. Expectations are that the Bank will reduce the Official Bank Rate to 1.50% from 2.00%.

At 13:30 US Initial Jobless Claims will be reported. Claims are expected to rise above the 500K mark once again to 540K from the 492K seen last week.

Canada’s Ivey PMI is set to be released at 15:00. The indicator is designed to give a snapshot of the economy as a whole and it is expected to continue its deterioration to 38.0 from the 40.2 seen in November.

High volatility will hit the market in three pockets on Friday, with the first coming from the UK. Manufacturing Production and PPI Input will be released at 09:30. Manufacturing Production will be reporting for the month of November where output likely fell by 0.5% on the month after a 1.4% decline in October. PPI Input for December will probably show that wholesale inflation fell by 2.0% in December after a 3.3% drop in November.

At 12:00 Canada will release employment data for the month of December. Employment Change is expected to show that the Canadian economy shed 21.0K jobs following a loss of 70.6K in November. The Unemployment Rate is expected to climb from 6.3 to 6.5 percent.

At 13:15 Canada will release its Housing Starts numbers for December. The annualized rate of new residential constructions is expected to have increased from 172K to 175K.

At 13:30 the highly anticipated Non-Farm Employment Change and Unemployment Rate numbers are due from the US. Non-Farm Employment Change is expected to show that the US lost 475K jobs in December after it shed 533K in November. The US Unemployment Rate likely grew to 7.0% from 6.7% one month previous.

At the same time Canada will release its monthly Building Permits data for November. There was a huge contraction of 15.7% in October with a further 3.7% fall expected in November.

Last Week
Global markets stabilised a little last week as fears of a worldwide market meltdown were eased. Words of support from world leaders began to transform into solid action plans and in some cases actual cash injections.

However, worries over global recession were remembered after a host of poor economic data, especially from the US. Traders were especially worried about US Core Retail Sales, Retail Sales, Building Permits and Housing Starts. All four economic indicators missed expectations and this was reflected by the Michigan Consumer Sentiment number which fell from 70.3 to a lowly 57.5.

This Week
The economic calendar is slightly lighter than normal this week which may keep both stock and forex markets in consolidation. Key events will be the RBNZ and BOC Interest Rate Statements, Bernanke testimony and the BOE Meeting Minutes.

The first high volatility event of the week come from Australia at 01:30 Monday morning. The Australian PPI is expected to come in at 0.9%, compared to 1.0% in the previous quarter.

Later the same day we will see probably the most highly anticipated US event of the week with Bernanke’s testimony before the House of Representatives Budget Committee at 15:00.

At 22:45 we will see QoQ CPI data from New Zealand. Inflationary pressures are expected to moderate slightly from 1.6% previously to 1.5%.

Tuesday will begin with more high volatility from Australia. The October 7th Interest Rate Meeting Minutes are expected. Traders will be very interested in the discussions that took place at a meeting where the RBA surprisingly by cutting a full 100 basis points to 6.00%.

At 03:10 RBA Governor Glenn Stevens is expected to bring more high volatility to the markets when he speaks about the international economy in Sydney.

The BOC Interest Rate Statement is due at 14:00 with a 0.50% cut expected. This will bring the Overnight Rate to 2.00% from 2.50%. This will mean that the BOC has cut the rate by a full one-percentage point in the last 14 days.

We will see some late volatility from the UK as BOE Governor Mervyn King speaks in Leeds. He is due to speak at 20:10 UK time.

The flurry of Australian data continues on Wednesday with the Australian CPI. Economists are expecting an AUD negative release with 1.0% consumer inflation compared to 1.5% in the previous quarter.

At 09:30 we will hear from the BOE Monetary Policy Committee with the BOE Meeting Minutes (visual analysis) release. It is expected that the MPC voted unanimously to cut rates by 0.50% on October 8th as part of the coordinated global move.

The USD/ CAD will be in focus at 13:30 with Canada’s Core Retail Sales expected to crate high volatility. Core sales are expected to moderate slightly down to 0.3% growth in September from 0.4% in August.

Wednesday is rounded off by the second central bank rate announcement of the week. The RBNZ Interest Rate Statement is due at 21:00 with the Official Cash Rate likely to be cut by 1.00% from 7.50% to 6.50%. This mirrors the actions of the RBA earlier in the month who also cut by 1.00%.

The first high volatility event of Thursday will be from the UK. Retail Sales is due at 09:30. This data has been highly volatile of late and this trend looks set to continue. Retail Sales for September are expected to have fallen by 0.8% in September when compared to a 1.2% increase in August.

The Bank of Canada will take the spotlight for the second time in a week on Thursday. The BOC Monetary Policy Report is due at 15:30 and BOC Governor Carney will hold a press conference on the same topic at 16:15.

On Friday morning we are due to see preliminary GDP data from the UK. Gross domestic product is expected to show negative growth of 0.2% after the previous quarter’s number of 0.0%.

Canada’s Core CPI (visual analysis) is due at 12:00 with growth in September expected to mirror that of August at 0.3%. Traders pay most attention the Core number and so does the BOC.

To round off the week we have Existing Home Sales (visual analysis) from the US. This release will also be supported by our visual analysis and historical data tool. The sale of existing residential homes is expected to have increased slightly in September with 4.95M units sold compared to 4.91M in August.

Chart of the Day for October 7th 2008 takes a look at the Australian Dollar (AUD). After the shock 1.00% RBA interest rate cut we take a look at the long-term picture and use technical analysis to identify a strong area of demand that is coming into play and supporting the market. We also have 50% and 61.8% Fibonacci Retracement levels to contend with.

Follow this link to watch a high-resolution version of the AUDUSD Technical Analysis video or play the video below.

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