EUR/USD: key news events that will affect the forex this week

Key economic data will be released this week: inflation in the UK and EU, and employment trends in Australia.

Last week was all about US economic data - inflation and retail sales were released last Wednesday and Friday respectively. As many economists expected, U.S. inflation has yet to peak, while retail sales disappointed in December.

The economic calendar is light on U.S. economic data in the week ahead. In addition, U.S. banks are closed Monday as the country celebrates Martin Luther King Day.

But light data from the U.S. doesn't mean the week ahead will lack volatility. So here are three economic data points to watch: UK inflation, EU inflation and Australian unemployment.

UK inflation
On Wednesday, U.K. inflation is expected to rise to 5.1% year-over-year, up from 5.0%. Considering what happened in the U.S. last week, the risk of inflation surprising on the upside is significant.

Because the U.S. is the world's largest economy, inflation is "exported" to its trading partners. Therefore, on Wednesday, GBP traders are on the lookout as rising inflation could prompt the Bank of England to raise rates sooner.

EU inflation
A day later, the final EU CPI data is due. The market expects the headline data to remain unchanged on the month at 4.9%, but the risk is similar to the one discussed earlier.

Core inflation data, which excludes energy, food, alcohol and tobacco prices, is more important for Euro traders. This is the ECB's preferred measure of inflation, and the forecast is that it will come out at 2.5% on the month.

At this rate, it is already above the ECB's 2% definition of price stability. However, the central bank does not plan to raise rates from their current levels, so much higher inflation could change market expectations.

Australian unemployment
For traders watching the Australian economy, this week brings some key economic data - the change in employment and the unemployment rate. The Australian economy is expected to have added 59,000 jobs in the past month, and the unemployment rate is expected to fall to 4.6% from 4.5%.