Top Ten Forex Events Outlook: Week Of November 5-9, 2012

The U.S. Presidential election and the Greek Parliament’s vote on newly-proposed austerity measures, coupled with three monetary policy announcements by major central banks will make for an interesting and busy week ahead, as the markets keep close eye on the U.S. election polls and gauge the odds of more easing by the Reserve Bank of Australia, the Bank of England and the European Central Bank.

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

1. EUR- Greek Parliament Vote on Austerity Measures, Mon., Nov. 5, all day event.

In a crucial vote, the Greek Parliament will have to approve a new set of austerity measures proposed by the Troika of creditors in order for Greece to receive its next 31.5 billion euro tranche of financial aid. A failure to do so will increase the chances that the country could run out of money and could push Greece one step closer to exiting the European Monetary Union. The euro’s recent decline could accelerate if anxiety levels rise as a result of a gridlock leading to further delays or if the measures do not pass.

2. USD- U.S. ISM Non-Manufacturing Index, a leading indicator of economic conditions measuring activity in the services sector, Mon., Nov. 5, 10:00 am, ET.

Another month of growth but at a slower pace would be the likely outcome of the report as the non-manufacturing index pulls back to 54.7 in October compared with 55.1 in the previous month.

3. AUD- Reserve Bank of Australia Interest Rate Announcement, Mon., Nov. 5, 11:30 pm, ET.

As Australia continues to feel the impact of the slowdown of its biggest trading partner China and the global economy, the Reserve Bank of Australia might consider the need to ease policy further with another 25 bps rate cut which will reduce the benchmark interest rate to 3.00% from the current 3.25% level. Pressures on the Australian dollar could mount if the central bank cuts rates and keeps the door open to more easing in the months ahead.

4. EUR- Eurozone Services PMI, a leading indicator of economic conditions measuring activity in the services sector, Tues., Nov. 6, 4:00 am, ET.

Fifteen months of contraction in manufacturing could be mirrored by the same conditions in the services sector as the index stays below the 50 boom/bust line with a reading of 46.2 in October from 46.1 in September.

5. GBP- U.K. Industrial Production, the main gauge of industrial activity measuring the output of factories, mines and utilities, Tues., Nov. 6, 4:30 am, ET.

Following the drop in the Manufacturing PMI, the U.K. industrial activity could also fail to demonstrate economic strength with the overall industrial output forecast to decline by 1.6% m/m in September compared with the 1.2% m/m contraction in the previous month.

6. USD- U.S. Presidential and General Election, Tues., Nov. 6, all day event.

A tight presidential race and an outcome too close to call would be sure to keep traders on their toes throughout Tuesday’s trading session. The volatility could continue on Wednesday as the markets around the world react to the announcement of the election winner and begin to price the impact of any potential changes in the political landscape of the world’s largest economy.

7. CHF- CPI- Consumer Price Index, the main measure of inflation preferred by the Swiss National Bank, Wed., Nov. 7, 3:15 am, ET.

The Swiss inflation gauge is forecast to stay in deflation territory for another month with an index reading of -0.2% y/y in October compared with -0.4% y/y in September. With deflationary pressures stubbornly persistent but beginning to ease a bit, the Swiss National Bank might not feel any urgency to implement further measure to weaken the franc.

8. AUD- Australia Employment and Unemployment Rate, the main gauges of labor market conditions measuring job creation and unemployment, Wed., Nov. 7, 8:30 pm, ET.

In recent months, the Australian labor market has shown weakness and the employment report could stay in line with this trend. The economy “down under” is forecast to add only 500 new jobs in October compared with 14,500 jobs in September, while the unemployment rate inches higher to 5.5% from 5.4% in the previous month. A weak employment report, especially if coupled with risk aversion and expectations of more rate cuts by the Reserve Bank of Australia, would be likely to weigh on the Aussie dollar.

9. GBP- Bank of England Interest Rate Announcement, Thurs., Nov. 8, 7:00 am, ET.

Recent better-than-expected economic data from the U.K. has reduced the odds of more easing by the Bank of England in November. Although policy makers could still consider a preemptive 50 billion pound Asset Purchase Program expansion, such decision will be more likely in the months ahead, especially if the economy takes a turn for the worse.

For the time being, the central bank will probably maintain the status quo and will also keep its benchmark interest rate unchanged at 0.50%. The GBP should benefit if, compared with other major central banks, the Bank of England continues to sits on the QE sidelines.

10. EUR- European Central Bank Interest Rate Announcement, Thurs., Nov. 8, 7:45 am, ET.

With the OMT bond buying program plan already in place, the European Central Bank has put the ball in the politicians' court and can afford to wait for another month in November. This, of course, does not mean that there will be no more easing in upcoming months, especially if the November 15 Q3 GDP estimate confirms the market's suspicions that a double-dip recession looms over the eurozone economy. In addition, although things have been somewhat more peaceful in the last few months, the EU debt crisis is still far from over.

It would not be surprising to see the European Central Bank producing an early 25 bps cut in November, although such decision will be more likely to come in the final month of the year or in the first quarter of 2013. Whether the ECB expands its already inflated balance sheet to buy bonds or announces an additional reduction in the benchmark rate, the euro should feel the pressure, especially if another rate cut makes it an even stronger contender for the title of preferred funding currency.