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Euro Looks to German Inflation Report to Power a Corrective Bounce

Euro Looks to German Inflation Report to Power a Corrective Bounce

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • Euro May Correct Higher if Augusts’ German CPI Data Tops Expectations
  • US Dollar Slumped on Profit-Taking in Asia, 2Q GDP Revision Eyed Ahead
  • See Economic Releases Directly on Your Charts with the DailyFX News App

The preliminary set of Augusts’ German CPI figures headlines the economic calendar in European hours. The baseline year-on-year inflation rate is expected to remain unchanged at 0.8 percent, matching a four-year low recorded in May.

In broad trend terms, German price-growth data has cautiously improved relative to consensus forecasts over recent months, hinting at the possibility for an upside surprise. Such an outcome may pour cold water on speculation about an imminent expansion of ECB stimulus, sending the Euro higher. The chart setup likewise hints the single currency is preparing to correct higher.

The US Dollar broadly underperformed in overnight trade, sliding as much as 0.2 percent on average against its leading counterparts. The selloff may reflect profit-taking in preparation for the upcoming release of revised second-quarter US GDP figures. The report is expected to see the annualized quarter-on-quarter growth figure revised down to 3.9 percent from the initially-reported 4.0 percent result.

A softer-than-expected print may undermine bets on a relatively sooner move to raise interest rates after the Federal Reserve wraps up QE3 asset purchases in October. Such a possibility after the benchmark unit hit a six-month high earlier this week makes a degree of profit-taking seem reasonable. Indeed, technical positioning warns a near-term top may be in place.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

1:00

AUD

HIA New Home Sales (MoM) (JUL)

-5.7%

-

1.2%

1:30

CNY

Industrial Profits (YoY) (JUL)

13.5%

-

17.9%

1:30

AUD

Private Capital Expenditure (2Q)

1.1%

-0.9%

-2.5%

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

7:55

EUR

German Unemployment Rate s.a. (AUG)

6.7%

6.7%

Medium

7:55

EUR

German Unemployment Change (AUG)

-5K

-12K

Medium

8:00

EUR

Eurozone M3 s.a. (YoY) (JUL)

1.5%

1.5%

Low

8:00

EUR

Eurozone M3 s.a. (3M) (JUL)

1.3%

1.1%

Low

8:30

GBP

Lloyds Business Barometer (AUG)

52

Low

9:00

EUR

Eurozone Industrial Confidence (AUG)

-4.5

-3.8

Low

9:00

EUR

Eurozone Consumer Confidence (AUG F)

-10

-10

Low

9:00

EUR

Eurozone Economic Confidence (AUG)

101.5

102.2

Low

9:00

EUR

Eurozone Services Confidence (AUG)

3.5

3.6

Low

9:00

EUR

Eurozone Business Climate Indicator (AUG)

-

0.17

Low

10:00

GBP

CBI Reported Sales (AUG)

27

21

Low

12:00

EUR

German CPI (MoM) (AUG P)

0.0%

0.3%

High

12:00

EUR

German CPI (YoY) (AUG P)

0.8%

0.8%

High

12:00

EUR

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

0.0%

0.3%

Medium

12:00

EUR

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

0.8%

0.8%

Medium

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EURUSD

1.3071

1.3128

1.3161

1.3185

1.3218

1.3242

1.3299

GBPUSD

1.6437

1.6505

1.6541

1.6573

1.6609

1.6641

1.6709

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

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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