The foreign exchange market was action packed last week. However this week the economic calendar is light. There are only a few event risks, most of which will probably be a nonevent for the currency market. These include the G8 Summit, Australian and Canadian employment numbers, the BoE rate decision, the US Trade Balance and the University of Michigan Consumer Confidence report.

G8 Summit (July 7-9)

The only thing that can have a meaningful impact on the dollar is the G8 meeting in Japan which will be held from July 7 to July 9. Last month was the finance ministers meeting, which proved to be a non-event for the US dollar. However going into that meeting, there was a lot of speculation about the possibility of currency intervention and a major change to the language relating to currencies in the communiqué. Inflation is a problem that central banks around the world are struggling with and the part of the reason why inflation has gotten to current levels is US dollar weakness. Official opposition to further dollar weakness by the G8 would trigger a major turn in the US dollar, one that could take USD/JPY towards 110 and the EUR/USD below 1.55. G8 meetings have in the past been huge market movers for the US dollar. This time around, there hasn’t been any speculation about a change in the FX language, but if one was to happen, the only possibility would be dollar bullish comments. China has already been unusually vocal about wanting to see the dollar stabilize and with oil prices hitting a new record high on Thursday, inflation has worsened. However no central bank governors are expected to attend the meeting in Hokkaido. In the past decade, all of the meetings that have affected the FX markets have been attended by central bank governors. Therefore like the Finance Ministers meeting last month, the upcoming G8 meeting attended by world leaders could end up being a nonevent for the US dollar.

Australian Employment Numbers (July 9)

Despite strong retail sales and price pressures, the Reserve Bank of Australia was surprisingly dovish. This week's employment numbers will go a long way in shedding more light on how the Australian economy is really doing. The drop in employment component of the manufacturing and service PMI reports suggest weak numbers, but the employment situation in the construction sector has improved.

Bank of England Rate Decision (July 10)

The currency pair with the most market moving data next week is the British pound. The Bank of England has an interest rate decision scheduled while the UK will release their industrial production and trade balance reports. Given the repeated disappointments in the PMI numbers, we now understand why the BoE has been reluctant to raise interest rates. Mervyn King and his colleagues are expected to leave rates interest rates unchanged once again at 5 percent - the last time they altered rates was in April when they eased by 25bp. If rates are not changed, the BoE will not release any comments or statements, which means that Thursday’s rate decision could be a non-event. In the week ahead, unless industrial production is surprisingly strong, the British pound should underperform the US dollar and Euro.

Canadian Employment Numbers (July 11)

Despite a new record high in oil prices, the Canadian dollar has barely budged because of fears about spillover effects from a slower US economy. On Friday, the IVEY PMI report hit the highest level in 2 years. This rise was largely due to the price component which hit the highest level ever. The employment numbers will provide more information on whether the economy is doing as well as the IVEY PMI number suggests.

US Trade Balance and Consumer Confidence (July 11)

The US trade balance and the preliminary figures for the University of Michigan Consumer Confidence numbers are the only pieces of US data that can impact the US dollar this week. Although the trade balance could improve with manufacturing ISM back in expansionary territory, consumer confidence should deteriorate further.

Antonio Sousa is a Currency Analyst for FXCM.