Talking Points:

British Pound May Fall as Soft Inflation Data Erodes BOE Policy Bets
Euro Unlikely to Find Lasting Volatility in German ZEW Survey Outcome
US Dollar May Rise on QE “Taper” Continuity is CPI Tops Expectations

The March set of UK inflation data headlines the economic calendar in European trading hours. The headline year-on-year CPI measure of price growth is expected to edge lower to 1.6 percent, marking the lowest level since October 2009. Year-on-year measures of wholesale and retail inflation (PPI and RPI, respectively) are likewise expected to tick downward to the weakest levels in nearly five years. Weakening price pressures speak to still-ample spare capacity in the economy. That means soft readings may push back against BOE policy normalization expectations, weighing on the British Pound.

Germany’s ZEW Survey of analyst confidence set to show a gauge of sentiment about the economy’s prospects in the coming six months dropped issued its fourth consecutive decline in April, hitting the lowest level since August 2013. Absent a particularly sharp deviation from expectations, the data is unlikely to generate a potent response from the Euro given its limited implications for ECB monetary policy expectations. Indeed, depending on when the survey was conducted, an upside surprise may be in the cards if analysts’ views were informed by the dovish rhetoric surrounding this month’s ECB policy announcement. Needless to say, that would be hardly supportive of the single currency.

Later in the day, the spotlight shifts to the US CPI report. The baseline year-on-year inflation rate is forecast to rise to 1.4 percent in March having hit a four-month low at 1.1 percent in the prior month. US price growth readings have improved relative to consensus forecasts over the past three months, according to data from Citigroup. That suggests economists are underestimating the recent build in inflationary pressure, opening the door for an upside surprise on today’s print. Such an outcome may help reboot confidence in the continuity of the Federal Reserve’s QE “tapering” cycle, offering a lift to the US Dollar.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

23:01

GBP

BRC Sales Like-For-Like (YoY) (MAR)

-1.7%

1.0%

-1.0%

1:30

AUD

RBA April Meeting Minutes

–

4:00

JPY

Tokyo Condominium Sales (YoY) (MAR)

–

-24.1%

6:00

JPY

Machine Tool Orders (YoY) (MAR F)

–

41.8%

European Session

GMT

CCY

EVENT

EXP

IMPACT