Sunday Night 

11:00 PM Sunday Evening: NZD Business Confidence: The indexes recent low was -57.9 in March.  Since then it has recovered somewhat to -49.7.  There is no estimate for the release, but the market will be eyeing the results for clues to the economy.

5:00 AM Eurozone CPI Flash Estimate.  This estimate is generally within 0.1% of the actual inflation measure.  ECB Targets 2-3 %.  The Flash for this month is expected to show a rise of 3.9% mainly due to the surge in energy prices once again. 

7:50 PM EDT, Tankan Large Manufacturers Index, The Tankan Index measures the general business conditions of large manufacturers. The quarterly survey asks respondents to rate subjects such as general business conditions, supply and demand conditions for products and inventories, prices, sales, and employment. SInce the most recent peak of 25 in the 4th quarter of 2006, the index has not had an uptick.  Last quarter the index stood at 11.  This quarter it is expected to decline to 3 as higher inflation, slower domestic spending and slower exports to the US have soured the mood of Japanese businesses.

12:30 AM EDT.  Reserve Bank of Australia Interest Rate decision.  The expectation is for the RBA to keep interest rates unchanged at 7.25%.  The last change was in February.  The current rate is at 12 year highs.   Australia has a tight labor force due to increased demand from China for the Australian raw materials.   However, domestic demand is slowing as the high interest rates and inflation are starting to slow consumer spending.  Although the official minutes will not be released until July 15th, any comments after the meeting from Governor Glenn Stevens will influence the market.

2:00 AM EDT, UK Nationwide House Prices.  Last month UK home prices fell by the most since at least 1991.  Tight credit limited the number of buyers who could afford the countries lofty priced homes.  The average price of homes dropped 2.5% versus April to 173,583 pounds (around $344,000 dollars).  From a year earlier prices have fallen by 4.4%.  This month the expectation is for a decline of 1.0% and the YoY to fall by 6.4%

4:00 AM EDT, Eurozone Manufacturing PMI.   The prelinary index was announced on July 23rd and showed the first reading below the 50 level in 5 years when it came in at 49.1.  The service index also fell below the 50 level coming in at 49.5.  Growth in the Eurozone is slowing due to high inflation, a strong EURO which makes exports more expensive abroad and the prospects of tighter monetary policy by the ECB.  The expectation is for no change from the preliminary estimate.   The Final Service Sector PMI is scheduled for release on Thursday at 4:00 AM.  The expectation is for no change in the preliminary release at 49.5. 

4:30 AM EDT, UK Manufacturing PMI.  The index hit the lowest level since the series was created in March of 2006 when it came in at 50.0 last month.  The 50 level is the breakeven level where the Manufacturing is expanding nor contracting.  However, since it is on a downward trajectory, the change and strength in manufacturing is certainly slowing.  This month the expectation is for the index to move below the key 50 level to 49.8.  The Service sector PMI is scheduled for release on Thursday at 4:30 AM EDT.  Expectation is for a decline to 49.5 from 49.8.

10:00 AM EDT, US ISM Manufacturing Index.  The US will also release the ISM index for the month of June.  The regional indices from NY, Philadelphia, and Richmond have been weaker than the previous months (the Chicago index will be released on Monday and is expected to come in at 48 versus 49.1).  Last month the index came in at 49.6.  This month the expectation is for a decline to 48.6 from 49.6 last month.  This would be the 5th month below the 50 level.  The Prices Paid component of the index is expected to remain unchanged at 87.0. 

9:30 PM EDT, Australia Retail Sales.  The Australian Retail Sales data for the month of May will be released at 9:30 PM EDT.  Last month sales declined by -0.2% versus March.  This was the 3rd decline in 4 months as the trend in domestic spending slows due to higher interest rates, and higher inflation.  This month the expectation is for a small gain of 0.1%.  The last 5 months have had month on month changes of -0.1%, -0.1%, 0.2%, -0.2% and if the estimate is correct +0.1%. 

3:15 AM EDT.  ECB Jean Claude Trichet will speak.  This will be the last speaking engagement for the head of the ECB before the monthly interest rate meeting and rate announcement on Thursday. 

4:30 AM EDT.  UK Construction PMI.  Last month the index declined at the fastest pace in 11 years when the index dropped to 43.9 from 46.1.  The index has fallen for 5 straight months from 56 in December. It was as high as 64.8 in August 2007.  This month the expectation is for another decline to 43.0 as tighter credit and higher inflation has the consumer strapped and overextended.

8:15 ADP Non Farm Employment Change.   Although the estimate for non farm job changes  from ADP is not correlating to the actual Labor Department release, the market still reacts to the estimate each month.  For example, last month the estimate was for a gain of 40,000 jobs.  The NFP instead showed a decline of 49,000.   This month the estimate by ADP shows a loss of 20,000 jobs while the NFP estimates show a loss of 60,000.  Maybe one of these months the estimate will actually match what NFP shows. 

9:30 PM EDT, Australian Trade Balance for May.  Australia generally shows a trade deficit with the last trade surplus occurring in March of 2002.  Last month a surge in the export of coal narrowed the trade deficit to the smallest gap since February 2007.    The deficit was reported at 957 million Australian dollars.  This month the expectation is for a similar number to be released.  The market will be focusing on the change in Imports and Exports to get a feel for overseas demand and for the strength of domestic spending for imports.    

1:45 AM EDT, Swiss CPI.  Last month Swiss CPI reached the highest level since October 1993 when it came in at 2.9%.   This month the expectation is for a further increase to 3.1% as higher gasoline works its way into the Swiss Economy.  For the month the gain is expected to show a 0.3% increase versus 0.8% last month. Central Bank President Jean-Pierre Roth has said that inflation could pose a 'real problem if it becomes entrenched' in the economy. 

5:00 AM EDT, Eurozone Retail Sales for May.  Last month the MoM loss was a revised -0.7% (originally reported at -0.6%). The change from a year ago showed a decline of -3.0%.  This was the largest decline since statistics were first recorded in 1995 for this series.  This month the expectations is for a rebound gain of 0.5% and for the year ago change to show a loss of -0.7%.  The MoM gain would be the first since January 2008. 

7:45 AM EDT, ECB Interest Rate Decision.   The expectation is for a rise of 0.25% to 4.25% as the ECB tries to slow the inflation surge.  The change was telegraphed after last months meeting and is well anticipated.  However, the rhetoric from the ECB seems to suggest the change is not part of a series of increases.  The economic environment remains fragile and inflation is mainly as a result of the large run up in energy costs.  Nevertheless, the ECB's mandate is the keep inflation within a target range with 3.0% YoY as the ceiling.  The expectation is for the rate to rise to greater than 4% in the near term.  The hope for the change is to limit the increase in inflation expectations.  There are some, however, who feel the tighter monetary policy will only weaken the economy even more and lead to a recession down the road.   At 8:30 ECBs Trichet will hold his traditional press conference which normally lasts an hour.  His words will be watched and interpreted by the market in real time.

8:30 AM EDT, US Non- Farm Payroll.  Due to the US 4th of July holiday on Friday, the US Non Farm Payroll for the month of June will be released a day earlier than usual. What makes the release even more interesting is it will correspond with the ECB press conference post their expected interest rate change higher.  As a result, the chance of volatile movements can be expected.  Last month the employment situation remained weak as 49,000 jobs were lost.  What shocked the market more, however, was the sharp jump in the Unemployment Rate to 5.5% from 5.0% the month prior.  The change was blamed on a surge in the youth of America entering the Labor Force, but also seemed supported by the steady increase in the Continuing Claims date.    This month the market is expecting the NFP to show a decline of 67,000 jobs.  This would be the 6th consecutive loss in jobs.  Manufacturing Jobs are expected to show a decline of 30,000 jobs, the 24th straight month of job losses for the sector.  The Unemployment Rate is expected to decline to 5.4%.  The Average Hourly Earnings are expected to increase by 0.3% MoM and 3.4% YoY.    Also at 8:30 weekly Initial and Continuing Claims will be released. 

10:00 AM EDT, US Non Manufacturing ISM Index for June.  The service index hit a low of 44.6 in January 2008 and has since rebounded back above the 50 level. The index came in at 51.7 down from 52.0 in the previous month. The service sector of the US economy makes up almost 90% of the US economy according to the Institute of Supply Management.   This month the expectation is for the index to remain above the 50 level for the third straight month.  However, the index is expected to decline again from the previous month to 51.0.  The number suggests the economy is growing but just barely.   

The markets will be quiet on Friday with only two minor economic releases scheduled for release out of Japan and Germany and the US Stock, Bond and Commodity markets closed for the 4th of July holiday.  FXDD will remain open and is scheduled to close at the normal Friday closing time of 4:00 PM.  However, be aware that the liquidity in the market will be limited.  This can cause price swings and could result in wider bid/offer spreads.  As a result, customers should reevaluate their risk parameters and take the necessary steps to account for the potentially higher risk.  To all our US customers we hope you have a safe and pleasant holiday on Firday, and for all our customers have a profitable week trading and thank you for your continued business.     

- Greg Michalowski, FXDD Chief Foreign Exchange and Economic Analyst