This week is full of major economic events in Europe, China, and the US. This week could show the divergence in the EU economy and the US (and in a smaller part the UK). With the portential for China to continue to slow (PMI comes out Wednesday night EST) and economic indicators coming out in the US and EU, there is good potential to see a split in the recoveries of these two countries. Additional the Fed and ECB talk this week could solidify the various growth patterns in the regions with the US possibly talking about tapering this ear and the EU most likely reiterating their commitment to keep rates low and open the possibility to have rates cut even further (even negative) in the future.
The news of the Japanese elections going as planned; Abe’s Liberal Democratic Party (LDP) and its partner have won a majority of upper house seats. This has the markets and the currency rallying, but I feel this could be short lived this week as there is plenty of negative economic news coming out that could derail optimism. China is announcing inflation numbers along with European consumer confidence (and German inflation). GDP numbers in Korea will see if the LDP policies are hurting the economy; the recent election wins will only exacerbate the fears of further slides in competitiveness. Near the end of the week we will see Japanese inflation numbers which will give some insight to the new government how strong their third arrow will have to be.
For the week I am putting on a short position of the EUR to the Yen and shorting the Nikkei. I am looking for a minor pullback in both of around 1% (which the EUR/JPY has started to do already). I think I will look to diversify my short EUR positions to other currency pairs over the week as well, preferably higher roll pairs such as the Lira or the Peso.