5 Most Important Events for the Forex Market This Week

Event risk for the forex market lies primarily on the euro and British pound side, as Euro-zone CPI, the German ZEW survey, UK CPI, and the minutes from the Bank of England's June policy meeting will be released. Meanwhile, the Canadian dollar must grapple with CPI data as well. Overall, most of the releases are expected to provide a boost to their respective currencies, which could lead the US dollar to give up some of last week's gains.
Euro-zone Consumer Price Index - June 16
Euro-zone CPI figures for May are not expected to be revised from initial estimates of a 3.6 percent annual increase in May - matching a 16-year high - and such a result is unlikely to stoke volatility in the euro. However, if CPI is revised higher, the news would be extremely bullish for the euro, especially since European Central Bank President Jean-ClaudeTrichet has already raised the prospect of a rate hike at their next meeting in July. On the other hand, a downward revision could lead the euro to sell-off sharply.
UK Consumer Price Index - June 17
On Tuesday at 4:30 EDT, an expected rise in the UK consumer price index above 3.0 percent will force Bank of England Governor Mervyn King to write a letter to Chancellor of the Exchequer Alistair Darling explaining how he plans to bring CPI back to their 2.0 percent Indeed, UK CPI is anticipated to rise to an annual pace of 3.2 percent - matching a 26-year high - from 3.0 percent. The BOE cut rates as recently as April 10 by a quarter point to 5.00 percent, but the Monetary Policy Committee now holds a resoundingly hawkish bias. As a result, very strong UK CPI figures could lead the British pound to rally upon release, especially ahead of the release of the BOE June meeting minutes on Wednesday.
German ZEW Survey - June 17
Sentiment amongst Germany's financial analysts is likely to turn more pessimistic in June, according to the ZEW survey. The figure is scheduled to be released at 05:00 EDT, and this release tends to be a significant market-mover for the EUR/USD pair on a very short-term basis. Given the surge in oil, broad indications of mounting inflation pressures, slowing in the Euro-zone's economies, and the European Central Bank's staunchly hawkish bias over the survey period, the ZEW reading is likely to fall in line with - if not more than - expectations.
Bank of England Meeting Minutes - June 18
The 4:30 EDT release of the minutes from the Bank of England's June meeting - when they left rates unchanged at 5.00 percent - presents major event risk for GBP/USD, as they are likely to reflect much of the same hawkish sentiment seen in the meeting minutes from May. Indeed, the minutes showed that in May, for most members a rate cut would "make it more difficult to keep inflation expectations in line with the target," and while "economic activity was likely to slow... some slowing in the growth rate of output was likely to be necessary for inflation to settle close to the target around two years ahead." Furthermore, the MPC cited concerns that the public would get the impression that a rate cut was an effort to "stabilize output growth rather than maintaining its focus on the inflation target." On the other hand, the minutes are also likely to show one vote for a rate cut by über-dove David Blanchflower, who said last month that the "factors pushing inflation up... were beyond the MPC's control and... current and prospective weakness of demand meant that there was a clear risk of missing the target on the downside looking further ahead." However, if the vote count actually shows that the decision to leave rates steady was a unanimous vote, or if there were any votes for a rate increase, the British pound could surge on the news.
Canadian Consumer Price Index - June 19
The release of Canadian inflation data is likely to remind the markets of the Bank of Canada's surprise decision to leave rates steady at 3.00 percent, as they called rates "appropriately accommodative". Headline CPI is forecasted to rise to 1.9 percent in May from a year earlier, up from 1.7 percent. On the other hand, the BOC's core measure is expected to hold steady at 1.5 percent, which is well below the Bank's 2.0 percent target. Nevertheless, any sort of pick up in these CPI results will only underpin the BoC's view that "the balance of risks to the Bank's April projection for inflation in Canada has shifted slightly to the upside." Furthermore, the Bank said that if "current levels of energy prices persist, total CPI inflation will rise above 3 percent later this year." Regardless of the result, if this inflation data proves to be unexpected, the Canadian dollar is likely to respond immediately, though the risks are greater for a strong CPI report to ignite a rally in the Loonie.
DailyFX
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