Top 10 Forex Events Outlook: May 28 – June 1

The Memorial Day holiday in the US shortened this week. The spotlight will remain on the euro and the U.S. dollar as a sequence of key U.S. labor market and economic growth data hits the newswires. The markets should keep a watchful eye on the latest headlines from the euro-area, the borrowing costs at the Italian bond auction, and the Irish referendum on the European Fiscal Stability Treaty.  

In preparation for the new trading week, here is the outlook for the Top 10 spotlight economic events that will move the markets around the globe:

1. USD- U.S. Consumer Confidence, the Conference Board’s index of consumers’ outlook on the economy, Tuesday, May 29, 10:00 am, ET.  

In line with the unexpected improvement in consumer sentiment, the U.S. consumer confidence index is forecast to inch higher to 70.0 in May from 69.2 in April.

2. EUR- Italy 10-year Bond Auction, Wednesday, May 30, around 2:00 am, ET.

The Italian Treasury will auction its benchmark 10-year bonds while the markets watch closely the level of demand and borrowing costs. The euro could come under pressure if investors demand higher premiums to hold Italian government debt.

3. USD- U.S. Pending Home Sales, a leading indicator of housing market activity, Wednesday, May 30, 10:00 am, ET.

After increasing by 4.1% m/m in April, the pending home sales index is forecast to flatten with a reading of 0% in May.

4. EUR- Ireland Referendum on EU Fiscal Stability Pact, Thursday, May 31, all day event.  

Irish voters will take to the polls to vote on the EU Fiscal Stability Treaty. Although most people in Ireland are in favor of the new EU fiscal rules, a surprising “no” vote will rattle the markets and could accelerate the pressure on the euro on fears that Ireland could become the next candidate to exit the European Monetary Union.

5. CHF- Swiss GDP- Gross Domestic Product, the main measure of economic activity and growth, Thursday, May 31, 1:45 am, ET.

Just as its largest trading partner the eurozone, Swiss economic growth is forecast to be also flat at 0% in the first quarter of 2012, compared with 0.1% in the fourth quarter of 2011. Further economic slowdown could force the Swiss National Bank to speed up its efforts to find new measures to weaken the franc.

6. EUR- Eurozone Flash HICP- Harmonized Index of Consumer Prices, the main measure of inflation preferred by the European Central Bank, Thursday, May 31, 5:00 am, ET.

Inflationary pressures in the eurozone are expected to subside to 2.5% y/y in May from 2.6% y/y in April, sending a signal that inflation might not be a major obstacle if the European Central Bank were to consider additional monetary policy easing.  

7. USD- U.S. ADP Employment Report, a measure of job creation in the private sector of the U.S. economy, Thursday, May 31, 8:15 am, ET.

Private sector job creation is forecast to pick up with 135K jobs added in May compared with 119K jobs in April.

8.    USD- U.S. GDP- Gross Domestic Product, the main measure of economic activity and growth in the world’s largest economy, Thurs., May 31, 8:30 am, ET.

The first of the three potential risk events for the dollar this week, the GDP report is forecast to bring a downward revision and to show the U.S. economy growing at a slower pace by 1.9% in the first quarter of 2012, compared with a preliminary estimate of 2.2% and 3.0% growth in the fourth quarter of 2011.

9. USD- U.S. Nonfarm Payrolls and Employment Situation, one of the main indicators of U.S. economic conditions measuring job creation and unemployment, Friday, Jun. 1, 8:30 am, ET.    

Scheduled for release only a few weeks before the next FOMC meeting on June 19-20, another weak nonfarm payrolls report, similar to the ones we witnessed in April and May, will raise QE3 odds significantly and will weigh on the USD. Although there is room for disappointments, the consensus forecasts are pointing to a more upbeat labor market data with the U.S. economy expected to add 150K to 170K jobs in May, compared with 115K in April, while the unemployment rate remains unchanged at 8.1%.

10. USD- U.S. ISM Manufacturing Index, a leading indicator of economic conditions in the U.S. measuring activity in the manufacturing sector of the economy, Friday, Jun. 1, 10:00 am, ET.
   
Activity in the U.S. manufacturing sector is expected to expand for another month, but at a slower pace with the Institute for Supply Management index forecast to pull back to 54.0 in May from 54.8 in April.