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Markets to Look Past European Data as Bernanke Testimony Looms

By , Currency Strategist
17 July 2012 07:18 GMT

Talking Points

  • US Dollar, Yen May Rise as Fed’s Bernanke Disappoints QE3 Expectations
  • Euro, British Pound to Look Past CPI and ZEW Data to Follow Risk Trends

UK Consumer Price Index figures kick off the European economic calendar, with expectations suggesting the annual inflation rate held at 2.8 percent in June to match the 31-month low recorded in May. Meanwhile, Germany’s ZEW Survey of investor confidence is due to show analysts’ evaluation of the current environment deteriorating for a second month while the forward-looking Expectations metric sinks to the lowest in six months.

While such outcomes may have been expected to weigh on the Euro and the British Pound amid growing expectations for additional BOE and ECB stimulus, risk appetite appears poised to overshadow domestic concerns as the spotlight turns to Fed Chairman Ben Bernanke and his semiannual Congressional testimony. An updated set of 2012 global growth expectations from the IMF released yesterday underscored once again that the US is seen accelerating while other key major output-driving countries slow (as in China) or outright contract (as in the Eurozone). This pins global recovery hopes on the ability of the US to offset headwinds from elsewhere, with additional support from the Fed understandably seen as conducive.

On balance, the outing seems unlikely to bring forward much in terms of new information. The central bank chief will probably leave the door open to additional easing in the event that the recovery materially falters – a now-familiar yarn meant to mollify jittery markets just enough to avoid pandemonium without actually expanding the balance sheet – while staying mum on specifics.Continued admonishmentof the incoherence on the fiscal side of the policy equation also looks to be in the cards.

While this would amount to little more than a restatement of the status quo, it may nonetheless prove to weigh on risk appetite. S&P 500 index futures are pointing firmly higher while the safe-haven US Dollar and Japanese Yen are uniformly under pressure heading into Bernanke’s testimony. This upswing in sentiment suggests traders continue to hold out hope for dovish rhetoric, meaning a status-quo outing has scope to disappoint expectations and weigh on risky assets.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

22:45

NZD

Consumer Prices Index (QoQ) (2Q)

0.3%

0.5%

0.5%

22:45

NZD

Consumer Prices Index (YoY) (2Q)

1.0%

1.1%

1.6%

1:30

AUD

RBA Board July Meeting Minutes

-

-

-

1:30

AUD

New Motor Vehicle Sales (MoM) (JUN)

-0.6%

-

2.3% (R-)

1:30

AUD

New Motor Vehicle Sales (YoY) (JUN)

18.4%

-

22.2% (R-)

1:51

CNY

Actual FDI (YoY) (JUN)

-6.9%

-2.0%

0.1%

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

6:00

EUR

EU 25 New Car Registrations (JUN)

-

-8.7%

Low

8:30

GBP

ONS House Prices (YoY) (MAY)

-

1.4%

Low

8:30

GBP

Consumer Price Index (MoM) (JUN)

-0.1%

-0.1%

High

8:30

GBP

Consumer Price Index (YoY) (JUN)

2.8%

2.8%

High

8:30

GBP

Core Consumer Price Index (YoY) (JUN)

2.5%

2.2%

Medium

8:30

GBP

Retail Price Index (JUN)

242.3

242.4

Low

8:30

GBP

Retail Price Index (MoM) (JUN)

0.0%

0.0%

Low

8:30

GBP

Retail Price Index (YoY) (JUN)

3.0%

3.1%

Low

8:30

GBP

RPI Ex Mort Int. Payments (YoY) (JUN)

3.1%

3.1%

Low

9:00

EUR

German ZEW Survey (Curr. Situation) (JUL)

30

33.2

High

9:00

EUR

German ZEW Survey (Econ. Sentiment) (JUL)

-20

-16.9

High

9:00

EUR

Euro-Zone ZEW Survey (Econ. Sentiment) (JUL)

-

-20.1

Medium

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2202

1.2360

GBPUSD

1.5552

1.5739

--- 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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17 July 2012 07:18 GMT