Light Data Week Has EU Summit in Focus; US 1Q GDP on Thursday
Little key data in the last week of June following a ‘disappointing’ Federal Reserve meeting last week has put rhetoric out of the Euro-zone at the top of the list for this week’s market movers. The Euro-zone Summit on Thursday and Friday now comes into focus before next week’s global central bank’s meetings.
06/27 Wednesday // 12:00 GMT: EUR German Consumer Price Index (JUN P)
Price pressures are falling across Europe, and Germany is certainly not immune. With growth slowing across the region, a dip in the German Consumer Price Index could provide some further impetus (not that a region-wide recession is anything to be concerned about) for the European Central Bank to cut its key interest rate. According to a Bloomberg News survey, the headline reading is expected to show no change on a monthly-basis, while it is expected to slow to 1.8 percent from 1.9 percent in May. The m/m EU Haromonised reading is expected to read -0.1 percent from -0.2 percent, while the y/y reading is due at 2.1 percent in June from 2.2 percent in May. Softer readings should be supportive of the Euro. The key pairs to watch are EURJPY and EURUSD.
06/27 Wednesday // 12:30 GMT: USD Durable Goods Orders (MAY)
Durable Goods Orders have been underperforming the past several months, but we feel that the May reading should be stronger than expected. According to a Bloomberg News survey, orders are forecasted to have grown by 0.5 percent after a mere 0.2 percent growth figure in April. This report is a strong indicator of manufacturing trends in the US, as it is a gauge of demand for goods with life spans of three years or more; typically, there is only strong growth in Durable Goods Orders when the economy is growing. The key pairs to watch are USDCAD and USDJPY.
06/28 Thursday // 07:55 GMT: EUR German Unemployment Change (JUN)
The slowdown in Europe has weighed little on the German economy, but that soon could be changing. While the broader Euro-zone ‘enjoys’ an Unemployment Rate north of 11 percent (including Germany), Germany itself has seen its labor market strengthen over the past several months, and the German Unemployment Rate now currently sits at 6.7 percent. Consensus estimates suggest that this did not change in June, though we expect the Unemployment Rate to start to tick higher in the coming weeks and months as the slowdown in the rest of Europe weighs on the core. If the German Unemployment Rate starts rising, look for German officials to soften their tone, and perhaps take on a more accommodative stance towards the crisis. The key pairs to watch are EURGBP, EURJPY, and EURUSD.
06/28 Thursday // 12:30 GMT: USD Gross Domestic Product (1Q T)
US growth was slower in the first quarter than most expected, with the most recent reading showing that growth came in at a paltry 1.9 percent (at one point, estimates had the US economy growing at a 3 percent annualized rate). The weakening labor market has hurt growth prospects, in no doubt due to a combination of uncertainty over the global growth outlook as well as the approaching fiscal cliff at the end of 2012. Nonetheless, if there is a revision lower, it shouldn’t show growth of less than 1.7 percent in the worst case scenario; we believe the consensus forecast of 1.9 percent is likely. The key pair to watch is USDJPY.
06/29 Friday // 12:30 GMT: CAD Gross Domestic Product (APR)
The Canadian economy has been quite resilient recently, even as its largest trading partner, the US, has started to show signs of weakness. However, as an economy that relies on the performance of commodities, perhaps we should take note of the other commodity economies, Australia and New Zealand, in recent months: both have seen their growth figures shoot past expectations with ease. Now, the growth situation in North America and Europe is significantly weaker than that in the Asian-Pacific region; so it is likely that if there is a beat on the data, it will only be marginally to the upside. According to a Bloomberg News survey, the m/m reading should show growth of 0.2 percent in April from 0.1 percent in March; and the y/y figure should show growth of 1.8 percent from 1.6 percent. The key pair to watch is USDCAD.
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--- Written by Christopher Vecchio, Currency Analyst
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