Last week, Euro confidence dropped as inflation at its fastest place in two and a half years. The Federal reserve was also faced with the challenge of diminishing the unwanted effects of inflation. Therefore, Fed Chairman Bernanke announce that interest rates would be kept near zero for an extended period of time as the economy reported weak expansion in the first quarter.

US GDP continued on its slow path to recovery as economists reported a 1.8% increase in the first quarter. Overall, USD and carry trades continued on its bearish momentum in the absence of hawkish remarks from the FOMC.

Here’s what we want to focus on for this week:

1. Monday May 2, 2011- 10:00 am- USD ISM Manufacturing PMI

2. Tuesday May 3, 2011-12:30 am- AUD RBA Rate Statement

3. Tuesday May 3, 2011- 4:30 am- GBP Manufacturing PMI

4. Wednesday May 4, 2011-8:15 am- USD ADP Non Farm Employment Change

5. Wednesday May 4, 2011-10:00 am- USD ISM Non- Manufacturing PMI

6. Wednesday May 4, 2011-9:30pm- AUD Retail Sales m/m

7. Thursday May 5, 2011-4:30am- GBP Services PMI

8. Thursday May 5, 2011-7:00 am- GBP BOE Interest Rate

9. Thursday May 5, 2011-7:45 am- EUR ECB Interest Rate

10. Thursday May 5, 2011-10:00am- CAD Ivey PMI

11. Friday May 6, 2011- 7:00am- CAD Employment Change

12. Friday May 6, 2011- 8:30am-USD Non Farm Employment Change

We want to start the week by paying special attention to Monday’s US ISM Manufacturing report becuase a positive outlook remains on U.S exports as well as gains in manufacturer worker employment. Also , EUR and GBP will announce their interest rate statements. Don’t expect any significant gains in either sector as the ECB and MPC will probably try to hold interest rates as well to counteract the rising concerns about inflation.

Finally, on Friday May 6, The US will report the Non Farm Employment Change. Soft numbers are expected in this release mainly because jobless claims rose above 429K, thus showing an increase in filing activity.