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Euro to Look Past German IFO Survey, US Dollar May Fall After CPI Data

Euro to Look Past German IFO Survey, US Dollar May Fall After CPI Data

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • Euro Unlikely to Yield Follow-Through on German IFO Survey Outcome
  • US Dollar May Decline Even if US CPI Data Tops Economists’ Forecasts
  • See Economic Data Directly on Your Charts with the DailyFX News App

The German IFO survey of business confidence headlines the economic calendar in European trading hours. The forward-looking Expectations index is expected edge lower for a second consecutive month, hitting the weakest level since February. The outcome is unlikely to drive significant Euro volatility considering its limited implications for near-term monetary policy. Indeed, as we expected, minutes from April’s ECB meeting showed policymakers saw no need to consider changing their current stance (contrary to speculation following comments from Governing Council member Benoit Coeure earlier in the week).

Later in the day, the spotlight turns to April’s US CPI report. Expectations call for a downtick on the year-on-year core inflation rate (from 1.8 to 1.7 percent) after three consecutive months of improvement. Leading survey data hints an upside surprise may be in the cards however. The latest PMI report from Markit Economics reveals that output prices in the service sector – the largest part of the overall economy – rose at the fastest rate in seven months in April.

While this may foreshadow a firmer CPI result, it is unclear that such an outcome would necessarily drive the US Dollar higher. The benchmark currency’s tepid response to relatively hawkish overtones in minutes from last month’s FOMC meeting released earlier in the week suggest it may be pre-disposed to continue the downward correction launched mid-April. That means the CPI release may amount to little more than the passing of event risk uncertainty that – absent a truly remarkable deviation from forecasts – clears a path for the USD selling to resume. The same may prove to be the case for comments from Fed Chair Janet Yellen due later in the day.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

1:00

NZD

ANZ Consumer Confidence (MAY)

123.9

-

128.8

1:00

NZD

ANZ Consumer Confidence (MoM) (MAY)

-3.8%

-

3.4%

2:00

CNY

Conference Board Leading Index (APR)

322.2

318.6

2:49

JPY

BOJ Annual Rise in Monetary Base

¥80T

¥80T

¥80T

3:00

JPY

BOJ Policy Statement/Kuroda Press Conference

-

-

-

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

6:00

EUR

German GDP n.s.a (YoY) (1Q F)

1.1%

1.1%

Medium

6:00

EUR

German GDP w.d.a (YoY) (1Q F)

1.0%

1.0%

Medium

6:00

EUR

German GDP (QoQ) (1Q F)

0.3%

0.3%

Medium

6:00

EUR

German Capital Investment (1Q)

0.8%

1.2%

Low

6:00

EUR

German Construction Investment (1Q)

1.8%

2.1%

Low

6:00

EUR

German Domestic Demand (1Q)

0.7%

0.5%

Low

6:00

EUR

German Exports (1Q)

0.5%

1.3%

Low

6:00

EUR

German Government Spending (1Q0

0.2%

0.2%

Low

6:00

EUR

German Imports (1Q)

1.6%

1.0%

Low

6:00

EUR

German Private Consumption (1Q)

0.6%

0.8%

Low

8:00

EUR

German IFO Business Climate (May)

108.3

108.6

Medium

8:00

EUR

German IFO Current Assessment (MAY)

113.5

113.9

Medium

8:00

EUR

German IFO Expectations (MAY)

103.0

103.5

Medium

8:00

EUR

ECB’s Draghi Speaks in Sintra, Portugal

-

-

Low

8:30

GBP

Central Government NCR (APR)

-

22.2B

Low

8:30

GBP

PSNB ex Banking Groups (APR)

8.3B

7.4B

Low

8:30

GBP

Public Finances (APR)

-

19.4B

Low

8:30

GBP

Public Sector Borrowing (APR)

7.9B

6.7B

Low

9:45

GBP

BOE’s Shafik Speaks in London

-

-

Low

11:00

GBP

BOE’s Carney Speaks in Sintra, Portugal

-

-

Low

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EURUSD

1.0922

1.1023

1.1068

1.1124

1.1169

1.1225

1.1326

GBPUSD

1.5279

1.5454

1.5558

1.5629

1.5733

1.5804

1.5979

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

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