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US Dollar May Rise on Rate Hike Bets, Euro to Look Past CPI Data

US Dollar May Rise on Rate Hike Bets, Euro to Look Past CPI Data

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • US Dollar May Rise as Employment Cost Data Boosts Fed Rate Hike Outlook
  • July’s Flash Eurozone CPI Unlikely to Inspire Lasting Euro Follow-Through
  • See Economic Releases Directly on Your Charts with the DailyFX News App

The preliminary set of July’s Eurozone CPI figures headlines the economic calendar in European trading hours. The benchmark year-on-year inflation rate is expected print at 0.2 percent, unchanged from the prior month.

The release seemsunlikely to inspire meaningful follow-through from the Euro considering their limited implications for near-term ECB monetary policy. Indeed, the central bank appears effectively on auto-pilot as it continues to implement its €60 billion/month QE effort through September 2016.

US economic data will enter the spotlight in the day. The second-quarter Employment Cost Index report is in focus, where expectations point to a slight deceleration for a print at 0.6 percent compared with 0.7 percent in the three months through March.

US news-flow has increasingly outperformed relative to consensus forecasts recently, opening the door for an upside surprise. Such a result – particularly if it is bolstered by an upside revision on July’s University of Michigan Consumer Confidence gauge – stands to reinforce bets on an on-coming Fed interest rate hike following this week’s hawkish shift in FOMC rhetoric, boosting the US Dollar.

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Asia Session

GMTCCYEVENTACTEXPPREV
23:05GBPGfK Consumer Confidence (JUL)457
23:30JPYJobless Rate (JUN)3.4%3.3%3.3%
23:30JPYJob-To-Applicant Ratio (JUN)1.191.21.19
23:30JPYOverall Household Spending (YoY) (JUN)-2.0%1.9%4.8%
23:30JPYNatl CPI (YoY) (JUN)0.4%0.3%0.5%
23:30JPYNatl CPI Ex Fresh Food (YoY) (JUN)0.1%0.0%0.1%
23:30JPYNatl CPI Ex Food, Energy (YoY) (JUN)0.6%0.4%0.4%
23:30JPYTokyo CPI (YoY) (JUL)0.2%0.2%0.3%
23:30JPYTokyo CPI Ex-Fresh Food (YoY) (JUL)-0.1%0.0%0.1%
23:30JPYTokyo CPI Ex Food, Energy (YoY) (JUL)0.3%0.2%0.2%
23:50JPYLoans & Discounts Corp (YoY) (JUN)2.74%-2.91%
01:00NZDANZ Activity Outlook (JUL)19-23.6
01:00NZDANZ Business Confidence (JUL)-15.3--2.3
01:15AUDCBA/HIA House Affordability (2Q)79.7-82
01:30AUDPPI (QoQ) (2Q)0.3%-0.5%
01:30AUDPPI (YoY) (2Q)1.1%-0.7%
01:30AUDPrivate Sector Credit (MoM) (JUN)0.4%0.5%0.5%
01:30AUDPrivate Sector Credit (YoY) (JUN)5.9%6.0%6.2%
03:00NZDMoney Supply M3 (YoY) (JUN)9.5%-8.1%
05:00JPYHousing Starts (YoY) (JUN)16.3%3.0%5.8%
05:00JPYAnnualized Housing Starts (JUN)1.033M0.913M0.912M
05:00JPYConstruction Orders (YoY) (JUN)15.4%--7.4%

European Session

GMTCCYEVENTEXP/ACTPREVIMPACT
06:00EURGerman Retail Sales (MoM) (JUN)-2.3% (A)0.4%Low
06:00EURGerman Retail Sales (YoY) (JUN)5.1% (A)-1.0%Low
08:30GBPLloyds Business Barometer (JUL)-55Low
09:00EUREurozone Unemployment Rate (JUN)11.0%11.1%Medium
09:00EUREurozone CPI Estimate (YoY) (JUL)0.2%0.2%Medium
09:00EUREurozone CPI Core (YoY) (JUL A)0.8%0.8%Medium

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EURUSD1.07461.08421.08871.09381.09831.10341.1130
GBPUSD1.54431.55231.55621.56031.56421.56831.5763

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

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