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Pound May Fall on UK GDP, Euro Engulfed in Greece Crisis Fallout

Pound May Fall on UK GDP, Euro Engulfed in Greece Crisis Fallout

Talking Points:

  • Greece Set to Miss IMF Repayment with As-Yet Unknown Euro Implications
  • Pound May Decline if 1Q UK GDP Revision Weighs on BOE Rate Hike Bets
  • See Economic Releases Directly on Your Charts with the DailyFX News App

The revised set of first-quarter UK GDP figures headlines the economic calendar in European hours. The baseline outlook calls for a slight upgrade showing output expanded 0.4 percent versus the 0.3 percent gain initially reported. UK news-flow has tended to underperform relative to consensus forecasts recently, opening the door for a downside surprise. Such an outcome may push back BOE rate hike expectations, weighing on the British Pound.

The preliminary set of June’s Eurozone CPI figures is likewise on tap. The core year-on-year inflation rate is expected to edge lower to 0.8 percent after hitting a nine-month high at 0.9 percent in the prior month. The outcome seems unlikely to trigger a significant response from the Euro considering its limited implications for near-term ECB policy trends. Indeed, the central bank seems to be on auto-pilot as policymakers continue to implement the €60 billion/month QE effort launched earlier this year.

Furthermore, Greece remains in focus as the markets continue to digest the breakdown in negotiations between Athens and its creditors over the weekend. While a national referendum on the compromise offered by the so-called “institutions” represents the next pivotal inflection point, the country is due to return €1.6 billion to the IMF today. While Greek Prime Minister Alexis Tsipras has already said the payment will not be made, the fund’s response on the implications of doing so have been unclear.

On balance, Christine Lagarde and company will probably want to avoid being the hand that forces the issue and opt to wait for the referendum’s outcome. Still, headline risks remain substantial and sharp volatility may break out. The ECB’s response may prove at least as important as that of the IMF itself. If the central bank judges Athens has defaulted, it will have to decide whether it will cut off emergency financing support for Greek banks. The central bank likely has little interest in shaping political realities, but keeping an eye on news-flow remains a priority.

The New Zealand Dollar underperformed in overnight trade as disappointing economic data drove fueled RBNZ interest rate cut expectations. The ANZ Business Confidence dropped to -2.3 in June, the lowest since March 2011. The Japanese Yen strengthened as risk aversion fueled safe-haven demand and encouraged unwinding of carry traders funded in terms of the perennially low-yielding currency.

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Asia Session

GMTCCYEVENTACTEXPPREV
22:45NZDBuilding Permits (MoM) (MAY)0.0%--0.9%
23:05GBPGfK Consumer Confidence (JUN)721
23:30AUDWeekly Consumer Confidence Index (JUN 28)116.3-114
01:00AUDHIA New Home Sales (MoM) (MAY)-2.3%-0.6%
01:00NZDANZ Activity Outlook (JUN)23.6-32.6
01:00NZDANZ Business Confidence (JUN)-2.3-15.7
01:30JPYLabor Cash Earnings (YoY) (MAY)0.6%0.7%0.7%
01:30JPYReal Cash Earnings (YoY) (MAY)-0.1%0.2%-0.1%
01:30AUDPrivate Sector Credit (MoM) (MAY)0.5%0.5%0.3%
01:30AUDPrivate Sector Credit (YoY) (MAY)6.2%6.1%6.1%
03:00NZDMoney Supply M3 (YoY) (MAY)8.1%-7.7%
04:00JPYVehicle Production (YoY) (MAY)-16.6%--7.5%
05:00JPYHousing Starts (YoY) (MAY)5.8%5.5%0.4%
05:00JPYAnnualized Housing Starts (MAY)0.912M0.915M0.913M
05:00JPYConstruction Orders (YoY) (MAY)-7.4%--12.1%

European Session

GMTCCYEVENTEXP/ACTPREVIMPACT
06:00EURGerman Retail Sales (MoM) (MAY)0.5% (A)1.3%Medium
06:00EURGerman Retail Sales (YoY) (MAY)-0.4% (A)1.1%Medium
07:00CHFKOF Leading Indicator (JUN)93.793.1Low
07:55EURGerman Unemployment Change (JUN)-5K-6KMedium
07:55EURGerman Unemployment Rate (JUN)6.4%6.4%Medium
08:00EURItalian Unemployment Rate (MAY P)12.3%12.4%Low
08:30GBPCurrent Account Balance (1Q)-24.0B-25.3BLow
08:30GBPGDP (QoQ) (1Q F)0.4%0.3%High
08:30GBPGDP (YoY) (1Q F)2.5%2.4%High
08:30GBPTotal Business Investment (QoQ) (1Q F)-1.7%Low
08:30GBPTotal Business Investment (YoY) (1Q F)-3.7%Low
08:30GBPIndex of Services (MoM) (APR)0.3%0.1%Low
08:30GBPIndex of Services (3M/3M) (APR)0.5%0.4%Low
08:30GBPLloyds Business Barometer (JUN)-55Low
09:00EUREurozone Unemployment Rate (MAY)11.0%11.1%Medium
09:00EUREurozone CPI Estimate (YoY) (JUN)0.2%0.3%High
09:00EUREurozone CPI Core (YoY) (JUN A)0.8%0.9%High

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EURUSD1.05101.08331.10351.11561.13581.14791.1802
GBPUSD1.54801.56051.56711.57301.57961.58551.5980

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

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