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.

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.