Markets are volatile and react strongly to any information. Already on Monday we get the first bomb – the U.S existing home sales report. Analysts expect a 1.8% decline. This report is crucial since it shows the condition of the housing market – the one that “caused” the global crisis. On Tuesday, investors will need to pay attention to the German Ifo Business Climate Index and the U.S PPI inflation report. Analysts expect the producer’s prices will increase by 0.4% while they dropped by 0.3% last month. Another sign that inflation is speeding up in the U.S. We will also see how consumers feel about the current economic situation. Consumer confidence, prepared and published by the Conference Board, is expected to drop to 82 from 89 points.

Interesting things will be going on during the rest of the week. On Wednesday, we start with the U.K’s GDP report. The rest of the day we will need to focus on the U.S market.  The Core Durable Goods are forecasted to decline by 1.4%, a drop from last month’s 2.3% increase. Another report from the housing market series, New Home Sales, is expected to show only a 0.7% decline. Maybe the U.S housing market situation is stabilizing and soon we will see increases? Important for the markets will be the speech that Bernanke will give. Federal Reserve Chairman will testify about the Monetary Policy Report before the US House of Representatives Committee on Financial Services, in Washington DC. On Thursday, Fed’s Chairman will continue to testify, this time before the Senate Committee on Banking, Housing, and Urban Affairs, in Washington DC. Less important but also worth attention will be European Central Bank’s President, Jean-Claude Trichet, speech at the Willem F. Duisenberg Lecture organized by the Nederlandsche Bank and the Netherlands Institute for Advanced Study, in the Netherlands. Also on Thursday, the U.S preliminary annualized GDP and GDP Deflator will be announced.

Instead of getting ready for the weekend, on Friday investors will need to follow financial news. In the Euro zone, the CPI and Consumer Confidence reports will be published. From the U.S, investor will await the Personal Spending, Personal Income and Core PCE Price Index. Also, the revision of the University of Michigan Consumer Sentiment publication will announced.

For Polish investors the most important event will be the Monetary Policy Council (MPC) meeting that starts on Tuesday and the interest rate decision being announced on Wednesday. Will the MPC decide to hike interest rates? The market expected no change from the current 5.25% but recent events might change the MPC’s strategy. CPI inflation grew to 4.3%, way over the 3.5% limit established by the national central bank. Also, wages and retail sales are growing fast, causing inflationary pressures. The decision will be important for the Polish currency. Since the beginning of the week, the Złoty is gaining against the euro and the dollar. It seems the market is discounting the interest hike by 25 basis points.

Adam Narczewski