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British Pound Looks to UK CPI Data to Drive BOE Rate Hike Bets

British Pound Looks to UK CPI Data to Drive BOE Rate Hike Bets

Ilya Spivak, Head Strategist, APAC

Talking Points:

May’s UK CPI figures headline the economic calendar in European trading hours. The core year-on-year inflation rate is expected to rise to 1 percent, rebounding from the 14-year low recorded in the prior month and snapping a three-month deceleration streak. Leading surveys appear to support the case for an improvement.

UK news-flow has tended to disappoint relative to consensus forecasts over recent months however, warning of the plausible probability of a downside surprise. Such an outcome may underscore the disparity between the BOE’s apparent nod toward a mid-2016 rate hike telegraphed in the central bank’s latest Inflation Report and the markets’ priced-in bets for tightening by the first quarter. The British Pound may face selling pressure in such a scenario, although follow-through may be limited as traders wait for the release of minutes from June’s MPC meeting before showing directional commitment.

The Australian Dollar declined after the publication of minutes from June’s RBA meeting. Governor Glenn Stevens and company reiterated that the stance of monetary policy should be accommodative, adding that further Aussie depreciation is both likely and necessary. Markets price in no further interest rate cuts over the coming 12 months however, hinting that downside follow-through may prove lacking in the near term.

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Asia Session

GMTCCYEVENTACTEXPPREV
23:30AUDWeekly Consumer Confidence Index (JUN 14)114.5-112.1
01:30AUDRBA June Meeting Minutes---
01:30AUDNew Motor Vehicle Sales (MoM) (MAY)-1.3%--1.5%
01:30AUDNew Motor Vehicle Sales (YoY) (MAY)0.8%-2.6%
04:00JPYTokyo Condominium Sales (YoY) (MAY)---7.6%

European Session

GMTCCYEVENTEXPPREVIMPACT
05:45CHFSECO June 2015 Economic Forecasts--Medium
06:00EUREurozone EU27 New Car Registrations (MAY)-6.9%Low
06:00EURGerman CPI (MoM) (MAY F)0.1%0.1%Medium
06:00EURGerman CPI (YoY) (MAY F)0.7%0.7%Medium
06:00EURGerman CPI EU Harmonized (MoM) (MAY F)0.1%0.1%Medium
06:00EURGerman CPI EU Harmonized (YoY) (MAY F)0.7%0.7%Medium
08:30GBPCPI (MoM) (MAY)0.2%0.2%High
08:30GBPCPI (YoY) (MAY)0.1%-0.1%High
08:30GBPCPI Core (YoY) (MAY)1.0%0.8%High
08:30GBPRPI (MoM) (MAY)0.3%0.4%Medium
08:30GBPRPI (YoY) (MAY)1.1%0.9%Medium
08:30GBPRPI Ex Mort Int. Payments (YoY) (MAY)1.1%0.9%Medium
08:30GBPPPI Input NSA (MoM) (MAY)0.6%0.4%Low
08:30GBPPPI Input NSA (YoY) (MAY)-11.3%-11.7%Low
08:30GBPPPI Output NSA (MoM) (MAY)0.1%0.1%Medium
08:30GBPPPI Output NSA (YoY) (MAY)-1.6%-1.7%Medium
08:30GBPPPI Output Core NSA (MoM) (MAY)0.0%0.0%Medium
08:30GBPPPI Output Core NSA (YoY) (MAY)0.1%0.1%Medium
08:30GBPONS House Price (YoY) (APR)-9.6%Medium
09:00EUREurozone Employment (QoQ) (1Q)-0.7%Medium
09:00EUREurozone Employment (YoY) (1Q)-0.9%Medium
09:00EURGerman ZEW Survey Current Situation (JUN)63.065.7Medium
09:00EURGerman ZEW Survey Expectations (JUN)37.341.9Medium
09:00EUREurozone ZEW Survey Expectations (JUN)-61.2Medium

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EURUSD1.10451.11501.12171.12551.13221.13601.1465
GBPUSD1.53161.54421.55211.55681.56471.56941.582

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

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