Tom Hanna's Lifestream

The big news this week will be on the inflation front and the related issue of the dollar which has been under increasing pressure the last few weeks. With the Export/Import Price Indexes showing signs of inflation in both categories, including but not limited to big spikes in oil import prices, there are plenty of indications that dollar denominated price inflation is rearing its ugly head at home and abroad. Tuesday the BLS will release the Producer Price Index, the key measure of domestic wholesale price inflation, and Wednesday the Consumer Price Index, the headline measure of domestic retail price inflation.
Domestic inflation is heating up for one simple reason – the doubling of the size of the Fed balance sheet and the base M1 money supply. Both those important figures are reported on Thursday, every week. Unfortunately the Fed's hands are nearly tied in reversing these trends as the broader economy still appears weak. Unemployment is still rising with weekly first time jobless claims still exceeding 600,000. Last week's surprise drop in claims has the 4-week average trending down, but not yet enough to give any real leeway to start seriously battling inflation. Another good report on Leading Indicators, also due out Thursday, could shore up confidence in the economy and the dollar while also helping with the perception that the Fed is helpless to contain inflation. Import inflation, especially in oil and other commodities, is being fed by weakness in the dollar, which is as much a matter of foreign investor confidence as anything else. Monday's Treasury report on International Capital will put a number to foreign feelings about the dollar and the US economy, while Wednesday's Current Account report from the Bureau of Economic Analysis will give investors a snapshot of the US position in the world economy. The worst numbers this week are likely to come from housing, as has become almost expected, and manufacturing. The housing numbers this week are among the weakest in the sector the last several months – home builder confidence as reflected in the Housing Market Index from the National Association of Homebuilders and housing starts as reported by the Commerce Department. In manufacturing, the Fed will report on industrial production, which has been weak, and the New York Fed will report on Empire State manufacturing. The Empire State report, seen as a leading indicator of the national report, is expected to continue its negative course based on poor new order numbers in last month's report.

Treasury has plenty of extra activity this week, with 2-year, 5-year and 7-year Treasury Note announcements on Thursday. Big borrowing numbers to support the massive federal budget gap continue to have the potential to negatively impact the dollar's value. Though there are no economic indicators due out Friday, don't expect a dull day. It's Quadruple Witching Friday when stock index futures, stock index options, stock options and single stock futures all expire. In international indicators, the Conference Board will release Leading Indexes for Korea and Spain on Tuesday and Wednesday, respectively. *See more information on the Financial Roadmap series here. Earnings reports are companies of interest, NOT recommendations.

You're reading a post from Financial Options, hopefully in your feed reader and not on a scraper site. Click through for the original and more like it. Financial Roadmap: The Week Ahead June 15 to 19, 2009