We will soon find out whether the Bank is right

AMERICAN markets are closed today for Presidents Day but that does obviously not equate to nap time for London traders. With an exceptionally busy economic calendar, this should be a very active week for everybody in the UK.

Some of the big, potentially market moving releases include consumer prices, employment numbers, retail sales and the minutes from the most recent Bank of England meeting.

Last week, the central bank released its quarterly Inflation Report and to the dismay of UK traders, the BoE reduced its growth forecasts and warned that inflation could undershoot its target over the next two years. This week’s economic reports will go a long way in determining whether their caution is warranted.

The BoE left the door open for additional asset purchases but if the employment, inflation and consumer spending reports are strong, then traders will wonder whether the central bank is being overly cautious. Good numbers should help the pound shake off some its recent weakness and lift UK stocks in the process.

As for the eurozone, sovereign debt problems dominated trading throughout the past week and despite the European Union’s announcement that they have reached an accord on Greece, investors are not satisfied. The German ZEW survey and PMI reports are the only major releases on the eurozone calendar.

The lack of punch in these reports suggests that Greece’s problems should continue to overshadow economic data. It has been very difficult to be long the Dax and the euro and even though Greece will eventually receive some sort of bailout, life isn’t going to get easier for continental Europe anytime soon.

Kathy Lien is director of currency research at GFT. Read her daily commentary at www.GFTUK.com/commentary or e-mail any questions you may have to the author at BorisandKathy@gftuk.com