Euro, US Dollar May Find Fuel to Bounce in Upcoming Economic Data

Talking Points:

Euro May Mount a Recovery if May’s Inflation Data is Revised Upward
US Dollar Could Find a Reprieve in Upbeat Industrial Production Print
Yen Rose on Haven Demand, NZ Dollar Gained on RBNZ Bets in Asia

The final revision of May’s Eurozone CPI data set headlines a relatively quiet European economic calendar. The headline year-on-year inflation rate is expected to be confirmed at 0.5 percent, in line with flash estimates. While that puts the pace of price growth at a five-year low, the release’s market-moving potential may be limited absent a meaningful deviation from forecasts considering deflation threats have already produced an expansion of ECB stimulus. It is worth noting that Eurozone inflation data has improved relative to expectations since the beginning of the year, opening the door for a Euro-positive result. In fact, EURJPY technical positioning hints a bounce may be ahead.

Later in the day, the spotlight turns to US economic data, with May’s Industrial Production data on tap. Output is expected to rise 0.5 percent, marking an improvement from a 0.6 percent decline in April. A positive outcome may help trigger a bounce in the US Dollar as markets move to a more neutral setting following last week’s selloff in the run-up to the upcoming FOMC policy meeting. News-flow from the world’s largest economy has broadly improved relative to consensus forecasts since early April but a recent string of disappointing releases took its toll greenback, putting its multi-year uptrend in jeopardy.

The New Zealand Dollar advanced in overnight trade, rising as much as 0.2 percent on average against its leading counterparts. The move tracked a pickup in front-end bond yields, hinting the gains reflected continued follow-through on last week’s hawkish RBNZ policy announcement. The Japanese Yen likewise advanced as the Nikkei 225 stock index traded lower, boosting haven demand for the safety-linked currency.

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