Bank of Japan Monetary Policy Meeting (June 14-15)

Consensus:  0.00%
Previous:  0.00%

Outlook: With the NIKKEI down 9.69 percent on the year and allegations of scandal surrounding Bank of Japan minister Toshihiko Fukui, it would be quite a bold move for the monetary policy body to act this early.  Even as economic data is coming in gradually better, the economy is still believed to be sensitive.  On the positive side, todayâ�,��"�s Capacity Utilization reached 106.6, a fourteen-year high.  The government also revised economic expansion higher from a preliminary 1.9% annual estimate to a heartier 3.1% pace due to business investment and improvements in the labor market that in turn forced core prices higher for a sixth month in April.  Even commentary from usually dovish political officials has is beginning to take on a hawkish tinge.  Todayâ�,��"�s comments from Economic and Fiscal Policy Minister Yosano who noted that the bank needs to end ZIRP, describing it as abnormal.  He claimed that the effect of the decline in stocks on the Japanese economy is â�,��"very limitedâ�,� in response to the tumbling NIKKEI.  However, there is still a strong argument amongst economists that says a rate hike now will exacerbated the plunge in firm value which would cause a ripple through global markets.  Another fresh issue on the BoJâ�,��"�s plate was Governor Fukuiâ�,��"�s confession that he invested in a fund whose founder was recently arrested for insider-trading.  Though far from illegal, it tarnishes the bankâ�,��"�s reputation and may put the decision to hike in a bad light.  Ultimately, Yen-traders will be listening closely to see if they can deduce if the BoJ will act in July or if it will take longer than anticipated.

Previous: The BoJ decided to stay with its long-standing ZIRP this May as it awaits more evidence that the worldâ�,��"�s second-largest economy is sufficiently out of the red.  Although Governor Fukui and colleagues signaled that they are preparing to raise rates, the decision was unanimous.  Japan wants to be sure that it waits until the right time to raise rates so that their export-driven economy can truly withstand competition from overseas as their currency appreciates.  Anyhow, the Japanese economy notably beat expectations of 1.1 percent for the first quarter, growing 1.9 percent according to initial estimates.  This growth has been accompanied by other positive data such as machine tool orders, housing starts and capital spending and sets up the two out of the three requirements the bank set forth before considering a rate hike.  Strong positive growth, and inflation have already been achieved; however the question of sustainable price growth is still debatable. 

UK Claimant Count Rate (MAY) (08:30 GMT; 04:30 EST)
 
Consensus:  3.0%
Previous:  3.0%

Outlook: The United Kingdomâ�,��"�s most common measure of employment, the claimant count, is expected to hold steady at 3.0 percent in May.  The rate has been rising steadily since the end of 2004 and looks to continue under the UKâ�,��"�s monetary outlook.  With poor industrial and manufacturing numbers coming in last week and the recent hawkish outlook, there is speculation that the measurement will only get worse.  As firms in the stalling manufacturing sector slow, the layoffs that are likely to follow could undo the inflationary boosting effects of the CPI and RPI figures that recently came out above expectations.  Employment is a primary concern when MPC has to contemplate when a rate hike is considered.  At this rate and going into the future; should officials raise rates to fight inflation, they will be curbing expansion and thus facing more welfare payments for the unemployed.

Previous:  Aprilâ�,��"�s jobless rate held steady at 3.0 percent while jobless claims managed a rise.  According to the Office for National Statistics in London, the number of claimants rose by 7,700 from March to 945,500.  This gain was the highest since June of 2003, beating out expectations of 7,300.  Manufacturers are still forced to dismiss workers due to last yearâ�,��"�s economic slowdown and swelling oil costs to help recoup sagging earnings.  Lagging consumer spending held the expansion in Europeâ�,��"�s second-largest economy to only 1.8 percent last year, for its worst performance since 1992.

US Consumer Price Index (YoY) (MAY) (12:30 GMT; 08:30 EST)
                (Headline) (Core)
Consensus:  3.9%      2.3%
Previous:      3.5%      2.3%

Outlook: The Consumer Price Index, the USâ�,��"�s primary measure of inflation, is expected to report a 0.4% increase on the month when it comes out on tomorrow. The increase this past month will likely be moderate, as May oil and commodities prices fell off somewhat from the record levels marked in April. This moderate increase will likely correlate with the Producer Price Index numbers that came out yesterday, which revealed a lower than expected 0.2% increase for the month of May. The increase in that index, which measures the inflation from the sellers perspective, is expected to be mirrored in the consumer basket as manufacturers begin to pass on their elevated production costs to a more accepting end consumer. Retail sales numbers this month rose only 0.1%, however, leaving open the possibility of a decrease in demand and subsequent easing in inflation - if not this month then maybe even a month or two in the future.  With oil prices still close to record highs and Bernanke warning that the Fed remains â�,��"vigilantâ�,� in its attempt to avoid entrenched inflation, the continual upward trend in the CPI is likely to induce the Fed to raise interest rates at its meeting near the end of June.

Previous:  Consumer prices in April jumped to a three-month high of 0.6%, marking the fastest pace of inflation at the start of a year since 1990 and putting the country on pace for 5.1% inflation this year. Much of the growth for the month was attributable to the increase in oil prices, which reached an all-time high of over $75 a barrel.  Additionally, oil prices were finally showing more influence on consumersâ�,��"� wallets than just at the gas pump and in heating bills, as revealed by the core CPI figures 0.3% advance.  With higher energy prices leaking into consumer goods, the second round inflation effects expected since last August could finally be materializing.  Furthermore, a hefty contributor to the increase in the core CPI was in home rental prices, as higher interest rates made mortgages more expensive and Americans began to look at the cheaper alternative of renting.

Richard Lee is a Currency Strategist at FXCM.