This week’s most important economic events will come from the US in the shape of the FOMC Interest Rate Statement, Existing Home Sales, New Home Sales and Gross Domestic Product.

With the Federal Open Market Committee already committed to a Federal Funds Rate of 0.00-0.25% there is basically no room for manoeuvre on the downside. However, the Fed could surprise the market and reduce the range closer to the BOJs 0.10 percent Overnight Call Rate.

With the Fed having used almost all of its ‘interest rate cut toolkit’ to stimulate the US economy there may be a change of focus to the outright purchase of long-term Treasury securities. This would attempt to bring interest rates lower across the yield curve, reducing the cost of a mortgage, in an effort to stimulate the housing market. However, with uncertainty in the jobs market and weak consumer confidence there may be continued weakness in housing for some time to come.

This Week
The first high volatility event of the week will be US Existing Home Sales, due for release at 15:00 on Monday. Data for December 09 is likely to show that the annualized sales pace of Existing Homes fell to 4.40M from 4.49M in November.

Tuesday will begin with Australian PPI at 00:30. Wholesale inflation for the fourth quarter of 2009 is expected to slow to 0.4% from 2.0% in Q3.

German Ifo Business Climate is scheduled for release at 09:00. The German economy is seen as a leading indicator for  Eurozone economic health  as a whole so the index will be closely watched. The index is expected to decline slightly from 82.6 to 81.0 for the month of January.

High volatility is also due from the UK at 11:00 on Monday. The Confederation of British Industry (CBI) Realised Sales indicator is expected to improve slightly to -53 from the previous -55.

At 15:00 the Conference Board’s US Consumer Confidence reading is due. As a precursor for consumer spending and overall economic health, this consumer confidence reading will be closely watched. The index is expected to improve slightly to 38.0 from the 38.7 seen for the month of December.

On Wednesday anticipation will be building for the FOMC Interest Rate Statement however, prior to this event Australian CPI will be released at 00:30 in the overnight session. Expectations are for a first quarterly fall in CPI to -0.4% after the 1.2% seen in Q3 of 2009.

At 19:15 we will see the highly anticipated Federal Funds Rate announcement with no change expected. The accompanying FOMC Interest Rate Statement is expected to create high volatility with comments on further “support for the functioning of financial markets” to be closely scrutinized.

The Fed isn’t the only central bank due to release monetary policy decisions on Wednesday with the RBNZ Interest Rate Statement also due. The Official Cash rate is likely to be cut to 4.00% from the 5.00% seen previously with economic growth in New Zealand under threat.

New Zealand will also announce Trade Balance data for December with the deficit expected to fall to NZD 100M from the 520M seen in November.

Thursday is set to be typically busy with the Nationwide House Price Index (HPI) due at 07:00. Expectations are for a 1.8% fall in house prices for January, following on from December’s 2.5 percent decrease.

There are several high volatility events due in the US session with Core Durable Goods Orders and Initial Jobless Claims both expected at 13:30. Core Durable Goods Orders probably fell by 2.6% in December following on from a revised 0.6% increase in November. Initial Jobless Claims came extremely close to the 600K mark last week (589K) with that number expected to fall slightly to 580K this week.

In the evening session New Zealand Building Consents will be released at 21:45 GMT. Consents increased by 4.3% in November of 08 after a fall of 19.7% the month previous.

The very last piece of key economic data from the US will be released at 13:30 on Friday. Gross Domestic Product (GDP) is expected to show a 5.4% decline in economic growth for Q4 2008. This is after a 0.5% decline in the third quarter.

Canadian monthly GDP will be released at the same time with a fall of 0.5% expected for November 08 after the -0.1 percent seen in October.

Please check our Economic Calendar for updates and actual releases as the week progresses.

This Week
The working week will be slightly shorter than usual in the US and Japan thanks to bank/ market holidays. The Labour Thanksgiving Day holiday takes place in Japan on Monday, while Thanksgiving Day will be celebrated in the US on Thursday. There is also an early market close at some US exchanges on Friday.

On Monday there will be major news from the Eurozone and the US. At 09:00 the German Ifo Business Climate Index will be announced. The Index is expected to slip to 88.8 from 90.2 in the previous month.

High volatility will come from the US at 15:00 with Existing Home Sales. Traders are expecting the annualized number to fall to 5.02M for the month of October, down from 5.18M seen in September.

Later in the day, at a time yet to be specified, President-Elect Obama is set to hold a press conference to discuss his economic team appointments. Although this event isn’t expected to create high volatility a reaction is expected from traders. This will probably be more evident in the stock market as traders assess the qualifications and suitability of those appointed.

Tuesday will be fairly action packed beginning with quarterly Inflation Expectations from New Zealand. The Reserve Bank of New Zealand survey of business managers is due at 02:00 with a CPI prediction of 3.0% seen at the last release.

High volatility is also expected for the MPC Treasury Committee Hearings at 09:45 on Tuesday. MPC members will testify before the UK Parliament’s Treasury Committee on the latest Inflation Report.

At 13:30 we will see high volatility from the US and Canada. Preliminary US GDP is due with a -0.5% reading expected after -0.3% in the previous quarter.

Canada will be releasing Core Retail Sales with a MoM increase of 0.2% forecast after the -0.3% seen last month. Retail Sales are also due but the Core number is seen as more important.

Later in the day the Conference Board’s US Consumer Confidence Index will be released. High volatility is expected for the indicator which is likely to remain at 38.0 for the second month in succession.

Wednesday will produce the second bout of GDP data for the week. The UK will announce its revised GDP reading for the 3rd quarter. No revisions are anticipated for the final reading so it is likely that UK GDP contracted by 0.5% in Q3.

At 13:30 there will be a US double header with Core Durable Goods Orders and Initial Jobless Claims due for release. Core Durable Goods Orders probably fell by 1.4% on the month after a revised 1.0% decline seen in September. Initial Jobless Claims will be closely watched after the 542K 16-year high last week. A slightly lower number of 530K is anticipated this time around.

At 15:00 we will see US New Home Sales. If analyst expectations are correct the annualized pace of New Home Sales will fall to 443K from 464K in September.

Rounding off a busy Wednesday will be the New Zealand Trade Balance. Expectations are for a narrowing of the trade deficit to 1000M from 1183M New Zealand Dollars.

As we have already discussed, Thursday will be slightly quieter than usual with the US holiday but we will have several important releases. First up at 00:30 is Private New Capital Expenditure from Australia. Expectations are for a 0.5% quarterly growth in private business expenditure, down from growth of 5.7% in the previous quarter.

At 02:00 we will see the National Bank of New Zealand Business Outlook report. The survey of business confidence came in at -42.3 last month.

At 07:00 we will see the UK’s Nationwide House Price Index. Average home prices in the UK continue to decline with a monthly fall of 1.7% expected according to the high street mortgage lender. This comes after a 1.4% decline in September.

After a quiet afternoon session New Zealand’s Building Consents are due for release. A monthly increase of 8.4% was seen in September.

Friday will be a quiet end to the week with only one high volatility event scheduled. The Confederation of British Industry (CBI) Realised Sales index is expected to show further decline in sales volume throughout British Industry. The index is expected to read -35 after -27 seen last month.

Last Week
Traders will go into work on Monday morning still trying to digest last week’s events. Just how will the market react to one of the most volatile weeks seen in decades?

Markets were thrown into turmoil straight from the off with the announcement that Lehman Brothers had gone bankrupt and the acquisition of Merrill Lynch by Bank of America. This was followed by the Fed bailout of AIG.

Financial markets in the US responded accordingly with the DOW’s biggest fall since 2001 with strength was seen in Gold and the Japanese Yen on risk aversion.

However, coordinated action from the world’s central banks flooded the market with liquidity which sparked the sharpest rally in US stocks since 1987. The US Government alone announced a $700 billion bank rescue plan and announced a ban on shorting financial stocks. This move was mirrored by financial authorities in the UK, Ireland and Australia.

This Week
This week will undoubtedly be dominated by the talking heads with Bernanke, Paulson and SEC Chairman Cox testifying no less than 4 times at various times. There are also two important US Housing data releases to consider.

Monday will start fairly slowly with little volatility coming from UK, Japanese or Eurozone economic releases. The first high volatility event of the week will come at 13:30 in the shape of Canadian Core Retail Sales. There was a 1.4% MoM increase for July with the August figure expected to show 0.3% growth.

Canada will also give us our second high volatility event of the week. The Core CPI is due for release at 12:00 on Tuesday. Data for August is expected to replicate that of July with a modest 0.1% MoM increase.

At 15:00 we have the first of the big testimonies with Bernanke, Paulson and Cox talking about the government takeover of Fannie Mae and Freddie Mac and recent market turmoil. They will testify in front of the Senate Banking, Housing and Urban Affairs Committee in Washington DC.

Wednesday gets underway with some economic volatility from the Eurozone with German Ifo Business Climate due for release. The index is likely to contract slightly to 94.2 from 94.8 last month.

Two hours later at 11:00 the UK’s Confederation of British Industry (CBI) index of Realised Sales will be released. This is a high volatility event with last month’s reading of -46 expected to improve slightly to -40. However, this number is still well below registering an increase in sales volume amongst the surveyed retailers and wholesalers.

At 15:00 we have a double header from the US. The first big housing data release of the week is due with Existing Home Sales likely to contract to 4.93M in August from 5.00M in July. At the same time Bernanke’s testimony before the Congressional Joint Economic Committee in Washington DC gets underway.

Bernanke is not finished there however. His second testimony of the day, this time with Paulson, before of the House Financial Services Committee gets underway at 19:30 BST.

Thursday will be dominated by high volatility from US sources. First of all we will see Core Durable Goods Orders. Last month offered a positive 0.7% increase with economists expecting that to be offset by -0.5% this time around.

At 15:00 we will see New Home Sales. Traders are expecting August’s sales to have softened to 510K from 515K in July.

Bernanke’s fourth and final outing of the week will come along with US Treasury Secretary Paulson once again. This time they will appear before the House of Representatives Committee on Financial Services with regards to Fannie Mae, Freddie Mac and recent market turmoil.

Thursday is rounded off by New Zealand’s Gross Domestic Product (GDP). QoQ the indicator is likely to show that the New Zealand economy contracted by 0.5%, more than the -0.3% seen in the previous quarter.

Friday promises to be a slightly quieter day, dominated by medium volatility events. The UK’s Nationwide House Price Index (HPI) is tentatively scheduled for a release although this could be put back to feature in the last week of the month. Economists expect a fall of 2.0% MoM to be reported.

A full schedule of this week’s testimonies can be found on our economic speeches calendar. The Existing Home Sales, New Home Sales and Canadian Core CPI releases will also be supported by our visual analysis and historical data tool. Full breakdown and evaluation of these data releases will be featured right here on our Market News blog.