The Euro and the British Pound may score near-term gains on the back of economic data but investors are more concerned with US CPI and its implications for Fed policy.
Talking Points
British Pound May Rise as UK CPI Rise Dents BOE Stimulus Outlook
Euro Could Find Support as German ZEW Survey Hits 3-Month High
US CPI Critical as Fed Policy Bets Take Center Stage Before FOMC
May’s UK CPI data headlines the economic calendar in European trading hours. The year-on-year inflation rate is expected to edge higher to 2.6 percent having set a seven-month low at 2.4 percent in the prior month. Prices appear to be responsive to monetary policy expectations, with GBPUSD tracking the UK-US 10-year bond yield spread and the BOE/Fed balance sheet ratio. That suggests an increase that scatters near-term BOE stimulus expansion bets is likely to be supportive for the British Pound, and vice versa.
Germany’s ZEW Survey of investor confidence is likewise on tap. Economists see the forward-looking Expectations index advancing to a three-month high. The Euro seems likewise sensitive to policy expectations, meaning the single currency could enjoy a near-term lift if a firm result weighs against the case for a more accommodative ECB.
G8 leaders continue a summit in Northern Ireland today. Issues including tax evasion, global trade expansion and Japan’s latest economic policies are tipped to be on the docket. Significant policy innovations are not expected but markets will nonetheless monitor chatter from the sit-down for any relevant headlines.
Looking past shorter-term catalysts however, the critical issue in question for the financial markets at large is the outcome of this week’s FOMC policy announcement and its implications for the timing of a reduction in QE3 asset purchases. That means whatever happens in early European trade may be swiftly overshadowed by the US CPI report, where a pickup in the headline price growth rate to 1.4 percent may send the US Dollar higher as traders mull the so-called “taper”.
Capitalize on Shifts in Market Mood with the DailyFX Speculative Sentiment Index
Asia Session:
GMT
CCY
EVENT
ACT
EXP
PREV
1:30
AUD
RBA Releases Minutes from June Meeting
–
–
–
2:00
CNY
Actual FDI (YoY) (MAY)
0.3%
–
0.4%
2:00
CNY
Conference Board Leading Index (MAY)
261.6
–
260.8
4:30
JPY
Industrial Production (YoY) (APR F)
-3.4%
–
-2.3%
4:30
JPY
Industrial Production (MoM) (APR F)
0.9%
–
1.7%
4:30
JPY
Capacity Utilization (MoM) (APR F)
1.6%
–
-0.8%
6:00
JPY
Machine Tool Orders (YoY) (APR F)
-7.4%
–
-7.4%
Euro Session:
GMT
CCY
EVENT
EXP/ACT
PREV
IMPACT
–
–
G8 Summit in N. Ireland – Day 2
–
–
High
6:00
EUR
EU 25 New Car Registrations (MAY)
-5.9% (A)
1.7%
Low
8:30
GBP
PPI Input n.s.a. (MoM) (MAY)
0.0%
-2.3%
Low
8:30
GBP
PPI Input n.s.a. (YoY) (MAY)
2.5%
-0.1%
Low
8:30
GBP
PPI Output n.s.a. (MoM) (MAY)
0.0%
-0.1%
Medium
8:30
GBP
PPI Output n.s.a. (YoY) (MAY)
1.4%
1.1%
Medium
8:30
GBP
PPI Output Core n.s.a. (MoM) (MAY)
0.1%
0.1%
Low
8:30
GBP
PPI Output Core n.s.a. (YoY) (MAY)
0.9%
0.8%
Low
8:30
GBP
CPI (MoM) (MAY)
0.1%
0.2%
High
8:30
GBP
CPI (YoY) (MAY)
2.6%
2.4%
High
8:30
GBP
Core CPI (YoY) (MAY)
2.1%
2.0%
High
8:30
GBP
RPI (MoM) (MAY)
0.2%
0.3%
Low
8:30
GBP
RPI (YoY) (MAY)
3.1%
2.9%
Low
8:30
GBP
RPI Ex Mort Int.Payments (YoY) (MAY)
3.1%
2.9%
Low
8:30
GBP
ONS House Prices (YoY) (APR)
2.5%
2.7%
Low
9:00
EUR
Euro-Zone ZEW Survey (Econ. Sentiment) (JUN)
–
27.6
Medium
9:00
EUR
German ZEW Survey (Curr. Situation) (JUN)
9.5
8.9
Medium
9:00
EUR
German ZEW Survey (Econ. Sentiment) (JUN)
38.1
36.4
High
Critical Levels:
CCY
SUPPORT
RESISTANCE
EURUSD
1.3293
1.3393
GBPUSD
1.5647
1.5755
— Written by Ilya Spivak, Currency Strategist for Dailyfx.com
To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.Learn forex trading with a free practice account and trading charts from FXCM.
Source: Daily fx