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Doing some weekend homework and preparing for the week ahead? Good for you! Here are three U.S. economic reports that I think you ought to pay attention to this coming week.

PCE Index

The Personal Consumption Expenditure index, or PCE, is one of the measures of inflation. You might be thinking, why the heck do we need the PCE? We already got the CPI! Well, the reason why you should pay attention to this report is because it’s the inflation report that Fed looks at when dissecting inflation. You wanna be cool right? Check out the PCE report!

Now, the reason why I’m warning you to pay close attention to next week’s report is because deflation (that’s right boys and girls, I said the big, bad D-word!) is now becoming a trending topic among Fed officials.

Some are saying that deflation is becoming more and more of a serious threat to the U.S. economy. Taking a look at the recent results of the PCE report, they reveal that consumer price growth has been dismal, showing monthly increases of just 0.1% for the past couple of months.

If the PCE report were to show that consumer prices have actually fallen, it would signal that demand is very weak, and would give the Fed even more reason to inject a couple hundred billion more dollars into the economy.

How does the government do this? That’s right, by quantitative easing measures!

And if we have learned anything the last couple of months, it’s that QE ain’t good for the U.S. dollar. So watch out for the PCE report on Monday, November 1 at 12:30 am GMT!

FOMC Statement

The Federal Open Market Committee, is basically a 12-man team that decides on the monetary policy stance appropriate for the U.S. economy based on its current economic and financial health.

Back in August, the FOMC dudes and gals began the move towards looser monetary policy in order to address the threat of a double-dip recession. Fed Reserve Chairman Ben Bernanke announced that the bank will reinvest about 150 billion USD in mortgage-backed securities and agency debt to boost the economy.

Most FX junkies are bracing themselves for more quantitative easing from the Fed when it releases its official statement on November 3 at 7:15 pm GMT.

But how and when the Fed will inject moolah into the economy is still anyone’s guess. A few economic gurus are expecting it to amount to around a trillion dollars while others are saying it may only cost 500 billion USD. There’s also the debate on whether to pump in the money by increments or do it in one sha-bam!

Don’t get me wrong, providing the economy with further stimulus is no a cakewalk. The doves of the FOMC are skeptical about QE2 as the Fed risks either uncontrolled inflation in the long-run or price spikes in commodities such as oil in the short-run. Yikes!

Non-Farm Payrolls

Of course, who would want to miss the big Non-Farm Payrolls employment report this Friday at 12:30 pm GMT? The NFP report shows the number of jobs created (or lost) in the non-farming sector for the past month.

Since employment is a leading indicator for consumer spending (which is one of the key drivers of the U.S. economy), this report can generate extremely volatile price action in the charts.

In fact, when the U.S. economy shed a total of 95,000 jobs in September on government layoffs and weaker private hiring, USD/JPY shot up by 86 pips in one hour before it closed nearly unchanged from its open price. That’s more volatile than Huck‘s mood swings!

This time around market geeks are pegging an increase of 70,000 workers for the month of October. While the glass-half-full estimate can encourage currency bulls, many traders are still skittish over the employment figures, especially when talks of quantitative easing have been hot in the markets for the past couple of weeks.

Will these reports join the recent slew of better-than-expected data from the U.S., or will they show gloomy pictures as they did last month? Tune in to these reports to find out!

Be careful in betting your pips this week and happy trading!