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Euro Looking to German ZEW and G20 Chatter for Guidance

Euro Looking to German ZEW and G20 Chatter for Guidance

2012-06-19 07:05:00
Ilya Spivak, Head Strategist, APAC
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Talking Points

  • British Pound Unlikely to Find Lasting Support in Steady CPI Result
  • Euro Looks to German ZEW, G20 Commentary for Direction Cues
  • Dollar Sold on Corrective Flows Overnight Despite Asian Stocks Drop

UK CPI figures are first to enter the spotlight as Europe comes online, with expectations suggesting the headline inflation rate will remain at 3 percent in May. While this does little to advance the case for an increasingly dovish Bank of England, it is likewise unlikely to detract from already substantial headwinds on the policy front after last week’s unveiling of a new credit-loan program. Although full operational details are a bit murky, speculation that it will be funded with new liquidity creation akin to QE seems likely to keep the British Pound relatively capped for now. With that in mind, risk appetite trends may prove to be more significant as a driver of price action in the near term until tomorrow’s releaseofminutes from June’s BOE meeting offers more clarity.

With that in mind, the spotlight turns to the German ZEW gauge of investor confidence. Economists’ forecasts suggest the headline index will ease back to 39.0 in June, snapping a two-month winning streak and printing at the weakest since March. The forward-looking Economic Sentiment measure is expected to decline to the weakest since January. The outcome may serve to remind investors that aside from generating the specter of financial market instability, the Eurozone debt fiasco represents a major drag on global growth by sinking the currency bloc’s economy – about one-fifth of overall world GDP – into a recession this year. Such an outcome is likely to re-energize demand for safe-haven currencies including US Dollar and Japanese Yen while weighing on the Euro amid building ECB rate cut expectations.

Ongoing negotiations to form a ruling a coalition in Greece and sideline commentary from the second day of the G20 summit in Mexico represent potential wild cards for risk sentiment and thereby the spectrum of major currencies. In Athens, ND leader Antonis Samaras appears to have secured the support of Pasok party chief Evangelos Venizelos, which would give the pro-bailout bloc enough seats in parliament to move forward. At the G20, Euro area turmoil seems clearly in focus as countries outside the region step up pressure on the EU to put its house in order. It remains to be seen if anything concrete emerges after the sit-down, but traders will at least hope for some guidance ahead of the more policy-specific EU leaders’ summit scheduled for late next week.

The US Dollar declined against all of its top counterparts overnight despite a drop in Asian stock exchanges that might have been expected to drive demand for the go-to haven currency. The disparity likely reflects corrective price action from the greenback and catch-up selling across Asian bourses, where shares reacted to risk-averse cues that had already made their way into exchange rate in yesterday’s European and US market hours. The greenback added 0.2 percent on average yesterday as surging Spanish bond yields overshadowed an initially positive mood in the wake of Greece’s weekend election, reminding investors that the Eurozone still had ample reasons for concern on the sovereign risk front.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

1:30

AUD

Reserve Bank of Australia June Meeting Minutes

-

-

-

5:00

JPY

Leading Index (APR F)

95.6

-

95.1

5:00

JPY

Coincident Index (APR F)

96.9

-

96.5

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

6:45

EUR

French Own-Company Production Outlook (JUN)

-

-4

Low

6:45

EUR

French Production Outlook Indicator (JUN)

-

-29

Low

6:45

EUR

French Business Confidence Indicator (JUN)

92

93

Low

8:30

GBP

Consumer Price Index (YoY) (MAY)

3.0%

3.0%

High

8:30

GBP

Consumer Price Index (MoM) (MAY)

0.1%

0.6%

High

8:30

GBP

Core Consumer Price Index (YoY) (MAY)

2.3%

2.1%

High

8:30

GBP

Retail Price Index (MoM) (MAY)

0.2%

0.7%

Medium

8:30

GBP

Retail Price Index (YoY) (MAY)

3.3%

3.5%

Medium

8:30

GBP

Retail Price Index (MAY)

243.0

242.5

Low

8:30

GBP

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

3.3%

3.5%

Low

8:30

GBP

DCLG UK House Prices (YoY) (APR)

-

-0.4%

Low

9:00

EUR

German ZEW Survey (Current Situation) (JUN)

39.0

44.1

High

9:00

EUR

German ZEW Survey (Econ. Sentiment) (JUN)

2.3

10.8

High

9:00

EUR

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

-

-2.4

Medium

9:00

EUR

Euro-Zone Construction Output w.d.a. (YoY) (APR)

-

-3.8%

Low

9:00

EUR

Euro-Zone Construction Output s.a. (MoM) (APR)

-

12.4%

Low

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2482

1.2709

GBPUSD

1.5543

1.5761

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

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

To be added to Ilya's e-mail distribution list, send a note with subject line "Distribution List" to ispivak@dailyfx.com

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