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Euro Selling May Return if German Inflation Data Disappoints

By , Currency Strategist
27 June 2014 06:21 GMT

Talking Points:

  • Euro May Renew Downward Push if German CPI Disappoints
  • British Pound Risks Tilted to the Downside on UK GDP Revision
  • Yen Gains as CPI, Jobs Data Hints BOJ to Withhold Stimulus

The preliminary set of June’s German CPI figures headlines the economic calendar in European hours. Expectations call for the benchmark year-on-year inflation rate to rise to 1 percent after dropping to a four-year low of 0.9 percent in the prior month. Price growth data out of the Eurozone’s largest economy has increasingly underperformed relative to expectations over recent months, according to data from Citigroup. That hints that analysts are underestimating the extent of disinflation and opening the door for a downside surprise. Such an outcome may weigh on the Euro as traders build out expectations for a further expansion of ECB stimulus after the central bank pledged to step up efforts to create a QE-like asset purchase program at June’s policy meeting.

The final revision of first-quarter UK GDP figures is expected to confirm output grew 0.8 percent in the first three months of the year. That would mark a slight acceleration from the 0.7 percent recorded in the prior period. A print in line with expectations seems unlikely to materially move the British Pound considering its limited ability to offer anything novel into the BOE monetary policy outlook. UK news-flow flat-lined relative to analysts’ forecasts toward the end of the first quarter and has increasingly soured thereafter however. That may open the door for a downward revision, an outcome that is likely to temper traders’ interest rate hike bets and send Sterling lower.

The Japanese Yen outperformed in overnight trade, rising as much 0.4 percent on average against its leading counterparts. The move followed an upbeat economic data set that showed the Jobless Rate unexpected fell to 3.5 percent in May – marking the lowest level in over 16 years – while the headline year-on-year CPI gauge moved to a two-decade high of 3.7 percent. The results suggested the Bank of Japan will be in no hurry to expand monetary stimulus efforts, offering de-facto support to the Japanese unit. Ebbing hopes for additional policy support also weighing on the Nikkei 225, stoking safe-haven Yen demand and amplifying the currency’s advance.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

22:45

NZD

Trade Balance (NZ$) (MAY)

285M

250M

498M

22:45

NZD

Trade Balance YTD (NZ$) (MAY)

1373M

1350M

1128M

22:45

NZD

Exports (NZ$) (MAY)

4.60B

4.50B

4.44B

22:45

NZD

Imports (NZ$) (MAY)

4.32B

4.23B

3.94B

23:01

GBP

Hometrack Housing Survey (MoM) (JUN)

0.3%

-

0.5%

23:01

GBP

Hometrack Housing Survey (YoY) (JUN)

6.0%

-

6.1%

23:05

GBP

GfK Consumer Confidence Survey (JUN)

1

2

0

23:30

JPY

Jobless Rate (MAY)

3.5%

3.6%

3.6%

23:30

JPY

Job-To-Applicant Ratio (MAY)

1.09

1.08

1.08

23:30

JPY

Household Spending (YoY) (MAY)

-8.0%

-2.1%

-4.6%

23:30

JPY

National CPI (YoY) (MAY)

3.7%

3.7%

3.4%

23:30

JPY

National CPI Ex-Fresh Food (YoY) (MAY)

3.4%

3.4%

3.2%

23:30

JPY

National CPI Ex Food, Energy (YoY) (MAY)

3.4%

2.2%

2.3%

23:30

JPY

Tokyo CPI (YoY) (JUN)

3.0%

3.1%

3.1%

23:30

JPY

Tokyo CPI Ex-Fresh Food (YoY) (JUN)

2.8%

2.8%

2.8%

23:30

JPY

Tokyo CPI Ex Food, Energy (YoY) (JUN)

2.0%

1.9%

1.9%

23:50

JPY

Retail Trade (YoY) (MAY)

-0.4%

-2.0%

-4.3%

23:50

JPY

Retail Trade s.a. (MoM) (MAY)

4.6%

2.9%

-13.6%

23:50

JPY

Large Retailers' Sales (MAY)

-1.2%

-2.5%

-6.7%

1:30

CNY

Industrial Profits YTD (YoY) (MAY)

9.8%

-

10.0%

1:30

CNY

Industrial Profits (YoY) (MAY)

8.9%

-

9.6%

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

6:00

EUR

German Import Price Index (YoY) (MAY)

-2.2%

-2.4%

Low

6:00

EUR

German Import Price Index (MoM) (MAY)

0.0%

-0.3%

Low

6:45

EUR

French GDP (YoY)

0.8%

0.8%

Medium

6:45

EUR

French GDP (QoQ)

0.0%

0.0%

Medium

7:00

CHF

KOF Leading Indicator (JUN)

100

99.8

Low

8:30

GBP

Lloyds Business Barometer (JUN)

-

41

Low

8:30

GBP

Current Account (£) (1Q)

-

-22.4B

Low

8:30

GBP

GDP (QoQ) (1Q F)

0.8%

0.8%

High

8:30

GBP

GDP (YoY) (1Q F)

3.1%

3.1%

High

8:30

GBP

Index of Services (3M/3M) (APR)

0.9%

0.9%

Low

8:30

GBP

Index of Services (MoM) (APR)

0.3%

0.4%

Low

8:30

GBP

Total Business Investment (QoQ) (1Q F)

2.7%

2.7%

Low

8:30

GBP

Total Business Investment (YoY) (1Q F)

8.7%

8.7%

Low

9:00

EUR

Eurozone Consumer Confidence (JUN F)

-

-7.4

Medium

9:00

EUR

Eurozone Economic Confidence (JUN)

103.0

102.7

Medium

9:00

EUR

Eurozone Industrial Confidence (JUN)

-3

-3

Low

9:00

EUR

Eurozone Services Confidence (JUN)

4

3.8

Low

9:00

EUR

Eurozone Business Climate Indicator (JUN)

0.4

0.37

Low

12:00

EUR

German CPI (MoM) (JUN P)

0.2%

-0.1%

High

12:00

EUR

German CPI (YoY) (JUN P)

1.0%

0.9%

High

12:00

EUR

German CPI - EU Harmonised (MoM) (JUN P)

0.2%

-0.3%

High

12:00

EUR

German CPI - EU Harmonised (YoY) (JUN P)

0.7%

0.6%

High

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EURUSD

1.3480

1.3545

1.3578

1.3610

1.3643

1.3675

1.3740

GBPUSD

1.6875

1.6944

1.6985

1.7013

1.7054

1.7082

1.7151

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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27 June 2014 06:21 GMT