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Dollar, Top Currencies to Judge US GDP Data in Terms of QE3 Outlook

Dollar, Top Currencies to Judge US GDP Data in Terms of QE3 Outlook

2012-07-27 06:55:00
Ilya Spivak, Head Strategist, APAC
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Talking Points

  • Currency Markets to See US GDP Report Through Prism of Fed Stimulus Bets
  • Soft German CPI May Weigh on Euro on Building ECB Rate Cut Expectations

Currency markets consolidated in narrow ranges overnight as traders waited for the second-quarter US Gross Domestic Product report to close out the week’s offering of top-tier event risk. Expectations call for output growth to slow to an annualized pace of 1.4 percent from 1.9 percent recorded in the three months through March. The outcome is likely to be interpreted in the context of Fed stimulus expectations ahead of next week’s FOMC policy meeting. With that in mind, a soft outcome stands to weigh on the US Dollar as dilution fears are amplified.

The preliminary set of German CPI figures is in focus on the European data front. Expectations call for the headline inflation rate to hold at 1.7 percent in July, matching the 18-month low recorded in the previous month. A soft print has scope to weigh on the Euro, reinforcing expectations for another interest rate cut at next week’s ECB policy meeting, although a strong reaction is unlikely before US GDP data crosses the wires. Data from Credit Suisse suggests investors are pricing in an 82.5 percent probability of a 25bps reduction in the benchmark lending rate. Separately, Italy is due to sell €8.5 billion in 6-mo bills, with traders keeping an eye on average yield and bid-to-cover readings to gauge Eurozone funding stress.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

23:30

JPY

National CPI (YoY) (JUN)

-0.2%

0.0%

0.2%

23:30

JPY

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

-0.2%

0.0%

-0.1%

23:30

JPY

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

-0.6%

-0.5%

-0.6%

23:30

JPY

Tokyo CPI (YoY) (JUL)

-0.8%

-0.6%

-0.6%

23:30

JPY

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

-0.6%

-0.6%

-0.6%

23:30

JPY

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

-1.0%

-1.0%

-1.0%

23:50

JPY

Retail Trade (YoY) (JUN)

0.2%

1.1%

3.6%

23:50

JPY

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

-1.2%

0.2%

0.7%

23:50

JPY

Large Retailers' Sales (JUN)

-2.6%

-1.6%

-0.8% (R+)

1:30

CNY

Industrial Profits YTD (YoY) (JUN)

-2.2%

-

-2.4%

1:35

CNY

MNI July Business Condition Survey

49.73

-

49.63

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

6:45

EUR

French Consumer Confidence Indicator (JUL)

90

90

Low

7:00

CHF

KOF Swiss Leading Indicator (JUL)

1.2

1.16

Medium

8:00

EUR

Italian Business Confidence (JUL)

88.5

88.9

Low

9:00

EUR

Italy to Sell €8.5B in 6-mo Bills

-

-

Medium

12:00

EUR

German CPI (MoM) (JUL P)

0.4%

-0.1%

Medium

12:00

EUR

German CPI (YoY) (JUL P)

1.7%

1.7%

Medium

12:00

EUR

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

0.4%

-0.2%

Low

12:00

EUR

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

1.9%

2.0%

Low

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2157

1.2369

GBPUSD

1.5530

1.5783

--- 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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