Weekly Outlook: 2014, August 10 - August 17

German Economic Sentiment; UK employment data; Mark Carney’s speech and inflation report; US unemployment claims, PPI, consumer sentiment are the major topics in Forex calendar. Check out these events on our weekly outlook.

The US economy gained momentum last week with an excellent ISM Non-Manufacturing PMI release climbing to 58.7 from 56 points in June, indicating continued growth in the largest sector of the economy. The reading showed strong gains across the board. The employment component is up from 54.4 to 56 points and factory orders topped predictions with a 1.1% rise. Further good news came from the US labor market with a 14,000 drop in the number of new unemployment claims. Both readings reflect the strong growth trend in US economy.

Eurozone German ZEW Economic Sentiment: Tuesday, 9:00. German analyst and investor climate continued to decline in July, falling to 27.1 points from June’s 29.8. Economists expected a higher reading of 28.9. Current conditions index also fell to 61.8 points from 67.7 in May, however still positive indicating a shift towards a domestically driven recovery in Germany. Nevertheless, the second quarter growth rate is expected to be lower than registered in the first quarter. This decline will also affect the Eurozone growth rate. German analyst and investor index is expected to plunge to 18.2.

1. UK employment data: Wednesday, 8:30. The Unemployment rate in Britain fell to 6.5% from March to May, reaching following 6.6% in the previous three months. The number jobseeker’s fell by 36,300 to 1.04 million. Prime Minister David Cameron noted that the rate of employment matched the record level set in 2005, indicating stronger British economy. However wage growth is at its lowest since 2009, while excluding bonuses average wage increases are their lowest since 2001. If this trend continues it will have a negative effect on economic growth. The number of jobless Britons is forecasted to decline 29,700 and the unemployment rate is expected to drop to 6.4%.
2. Mark Carney speaks: Wednesday, 9:30. Bank of England governor Mark Carney will hold a press conference in London about the inflation report. The Governor stated he was pleased with the rise in inflation, noting it came close to the BOE’s target of 2%. Market volatility is expected.
3. US retail sales: Wednesday, 12:30. Retail sales in the U.S. advanced solidly in June. Core sales, excluding automobiles, gasoline, building materials and food services, edged up 0.6% following a revised 0.2% in May. Core sales are the best gauge for consumer spending component of gross domestic product. June’s gains indicate an upward trend in consumer spending in the second quarter. However retail sales gained only 0.2% in June after posting a 0.5% rise in May. Retail sales are expected to gain 0.2%, while core sales are predicted to edge up 0.4%.
4. US Unemployment Claims: Thursday, 12:30. The number of US initial Jobless claims fell 14,000 last week to a seasonally adjusted 289,000. The reading was well below the 305,000 forecasted by analysts, indicating the US labor market continues to improve strengthening the US economy. The four-week average declined 4,000 to 293,500. That’s the lowest average since February 2006. The number of workers continues to grow as well as higher waged which will boost consumer spending in the coming months. The number of initial jobless claims is expected to reach 307,000 this time.
5. UK GDP data: Friday, 8:30. Britain’s economy is expected to advance 0.8% in the second quarter matching the first estimate issued in July. The anticipated advance marches the UK economy to prerecession levels. The positive forecast indicates, recovery is back on track, but wage growth needs to rise in order to sustain long term recovery. The second GDP estimate is expec6ted to remain unchanged at 0.8% growth rate.
6. US PPI: Friday, 12:30. U.S. producer prices edged up 0.4% in June amid rising gasoline costs, but overall inflation remained tame. Analysts expected a smaller rise of 0.2% as posted in the previous month. Gas prices jumped 6.4%, Steel costs edged up 3%. But prices declined for grains, cheese and rental cars to offset some of those increases. Nevertheless, inflation remains tame with in the Fed’s 2% target. Low inflation has enabled the Fed to pursue extraordinary measures to boost the economy but can drag down wages and spark a recession. U.S. producer prices are expected to rise 0.1%.
7. US Prelim UoM Consumer Sentiment: Friday, 12:30. Consumer sentiment declined in July to 81.3 from 82.5 in June amid a fall in the consumer outlook index. Analysts expected the index to reach 83.5. Current economic conditions rose to 97.1 from 96.6, better than the 97.0 forecast. But consumer expectations plunged for a third straight month, to 71.1 from 73.5 below the 74.0 expected. Consumer sentiment is likely to improve to 82.7.