This week is shaping up to be very exciting – and short – for the forex markets, as a slew of important economic releases and the Independence Day holiday in the US could lead to an influx in volatility from Monday – Thursday. US dollar traders will face ISM Manufacturing and Non-farm Payrolls, the biggest market-mover for the currency. Meanwhile, Euro traders will see the release of not only Euro-zone inflation and German labor market data, but also an expected rate hike by the European Central Bank for the first time since last summer.

Euro-Zone Consumer Price Index Estimate– June 30

Eurostat estimates for Euro-zone CPI are expected to show that inflation accelerated at an ever faster clip of 3.9 percent in June. If CPI is indeed confirmed at this pace, the figure would match the 16-year high and would be extremely bullish for the euro, especially since European Central Bank President Jean-Claude Trichet is already anticipated to hike rates by 25 basis points to 4.25 percent at their next meeting on Thursday. However, weaker-than-expected reading could lead the euro to sell-off sharply, as the news would give Mr. Trichet leeway to put off increasing rates until later in the summer.

German Unemployment Change – July 1

The German labor markets are expected to have improved in June, as the number of unemployed workers in the country is forecasted to fall by 15,000 after the index unexpectedly rose by 4,000 last month, marking the first gain in more than two years. This report will hit the wires at 3:55 EDT, and the news tends to spark quite a bit of short-term volatility, especially if the unemployment change misses expectations by a large margin. As a result, those trading the euro, especially against the US dollar, during the European session should keep an eye on the indicator.

ISM Manufacturing – July 1

The Institute for Supply Management is expected to report at 10:00 EDT that their survey of conditions in the manufacturing sector held below 50 – signaling contraction – for the fifth consecutive month at 49.0. In fact, data from the New York, Philadelphia and Richmond Federal Reserve regions all showed a continued deterioration during the survey period. That said, these are both very volatile reports, but given broadly weak domestic demand in the US, the risks are tilted to the downside for the ISM manufacturing release. The employment component will also be watched carefully as a gauge for Thursday’s Non-farm Payroll report.

European Central Bank Rate Decision – July 3

For the first time since June 2007, the European Central Bank is widely expected to raise interest rates by 25 basis points to a nearly 7-year high of 4.25 percent. Indeed, ECB President Jean-Claude Trichet, whose primary mandate is to maintain price stability, said after the most recent policy meeting that they would consider hiking rates the following month, and that some policy makers had actually wanted to tighten monetary policy in June. Mr. Trichet’s comments came just as Euro-zone CPI jumped more than expected to a 16-year high of 3.7 percent, and while growth throughout the region slowing, the European Central Bank appears to be prepared to tighten monetary policy in order to combat rising price pressures. The rate announcement will come at 7:45 EDT and is likely to give the euro at least a short-term boost, but traders should also look for the big show at 8:30 EDT when Mr. Trichet will give his monthly press conference. With CPI well above the ECB’s 2 percent target, price stability should remain Mr. Trichet’s foremost concern. However, if he gives the slightest hint that a rate hike in July was a one-and-done sort of deal, the euro could actually sell-off across the majors.

US Non-Farm Payrolls – July 3

The US Non Farm Payrolls report is one of the most consistent market-moving economic releases on any calendar, and Thursday’s result should be no exception. Indeed, this news release at 8:30 EDT and the number is notoriously difficult to handicap, so traders should keep an eye out for the NFP Preview on Wednesday in order to get a sense of how the data will fare. Our bias as of Monday: NFPs could fall negative for the sixth consecutive month, but if the unemployment rate dips down to 5.4 percent from 5.5 percent in line with expectations, the US dollar could actually strengthen on the release.

Jamie Saettele is a Technical Currency Analyst for FXCM.