Talking Points:
- British Pound volatility risk tilted to the upside as UK inflation data looms
- US Dollar may resume advance if CPI figures rekindle Fed rate hike bets
- Hawkish shift in US monetary policy views to weigh on Aussie, NZ Dollars
UK CPI figures headline the economic calendar in European trading hours. The headline year-on-year inflation rate is expected to remain unchanged at 0.5 percent in April while the core figure – a measure of the underlying price growth trend that excludes volatile components like food and energy – ticks lower from 1.5 to 1.4 percent.
News-flow out of the UK has increasingly underperformed relative to consensus forecasts since early April, hinting that economists’ models may be calibrated for a rosier environment than reality has confirmed. This opens the door for a downside surprise, though the implications of such an outcome for the British Pound seem limited considering there is little room for deterioration in the BOE policy outlook. Indeed, a rate hike is not expected until late 2017.
On the other hand, an upside surprise clashing with status-quo bets and forcing a degree of portfolio readjustment may encourage volatility. Leading survey data from Markit Economics offers some evidence in favor of such a narrative: deflationary pressure in the construction sector continued to ease while service-sector price growth hit the highest level in 27 months in April. A firm print may boost Sterling in the near term but follow-through may prove limited while traders remain pre-occupied with the “Brexit” referendum.
Later in the day, US CPI data captures the spotlight. The report is expected to show the spread between headline and core CPI hit a three-month low, which may bolster the Fed’s argument that transitory disinflationary pressure is fading and lay the groundwork for a sooner rate hike than investors have accounted for. Indeed, Fed Funds futures imply a mere 4 percent probability of tightening next month.
Figures suggesting a more hawkish posture are likely to drive the US Dollar higher, rekindling last week’s upside momentum after yesterday’s corrective pullback. Sentiment-sensitive currencies seem likely to underperform in such a scenario, with the Australian and New Zealand Dollars following share prices downward.
Check out the latest standings for the FXCM $10k trading contest HERE.
Asia Session
GMT |
CCY |
EVENT |
ACT |
EXP |
PREV |
23:30 |
Weekly Consumer Confidence Index (MAY 15) |
115.1 |
- |
113.9 |
|
01:30 |
AUD |
RBA May Meeting Minutes |
- |
- |
- |
01:30 |
AUD |
New Motor Vehicle Sales (MoM) (MAY) |
-2.5% |
- |
2.2% |
01:30 |
AUD |
New Motor Vehicle Sales (YoY) (MAY) |
2.4% |
- |
4.2% |
03:00 |
2Yr Inflation Expectation (2Q) |
1.64% |
- |
1.63% |
|
04:30 |
Industrial Production (YoY) (MAR F) |
0.2% |
- |
0.1% |
|
04:30 |
JPY |
Industrial Production (MoM) (MAR F) |
3.8% |
- |
3.6% |
04:30 |
JPY |
Capacity Utilization (MoM) (MAR) |
3.2% |
- |
-5.4% |
European Session
GMT |
CCY |
EVENT |
EXP |
PREV |
IMPACT |
07:00 |
Total Sight Deposits (MAY 13) |
- |
491.7b |
Low |
|
07:00 |
CHF |
Domestic Sight Deposits (MAY 13) |
- |
419.5b |
Low |
07:15 |
CHF |
Producer & Import Prices (MoM) (MAY) |
0.1% |
0.0% |
Low |
07:15 |
CHF |
Producer & Import Prices (YoY) (MAY) |
-2.7% |
-4.7% |
Low |
08:30 |
GBP |
CPI (MoM) (MAY) |
0.3% |
0.4% |
High |
08:30 |
GBP |
CPI (YoY) (MAY) |
0.5% |
0.5% |
High |
08:30 |
GBP |
CPI Core (YoY) (MAY) |
1.4% |
1.5% |
High |
08:30 |
GBP |
RPI (MoM) (MAY) |
0.3% |
0.4% |
Medium |
08:30 |
GBP |
RPI (YoY) (MAY) |
1.5% |
1.6% |
Medium |
08:30 |
GBP |
RPI Ex Mort Int. Payments (YoY) (MAY) |
1.6% |
1.6% |
Low |
08:30 |
GBP |
PPI Input NSA (MoM) (MAY) |
1.1% |
2.0% |
Low |
08:30 |
GBP |
PPI Input NSA (YoY) (MAY) |
-6.7% |
-6.5% |
Low |
08:30 |
GBP |
PPI Output NSA (MoM) (MAY) |
0.2% |
0.3% |
Medium |
08:30 |
GBP |
PPI Output NSA (YoY) (MAY) |
-0.8% |
-0.9% |
Medium |
08:30 |
GBP |
PPI Output Core NSA (MoM) (MAY) |
0.1% |
0.1% |
Low |
08:30 |
GBP |
PPI Output Core NSA (YoY) (MAY) |
0.3% |
0.2% |
Low |
08:30 |
GBP |
ONS House Price (YoY) (MAR) |
- |
7.6% |
Low |
09:00 |
Eurozone Trade Balance SA (MAR) |
22.0b |
20.2b |
Low |
|
09:00 |
EUR |
Eurozone Trade Balance NSA (MAR) |
- |
19.0b |
Low |
Critical Levels
CCY |
Supp 3 |
Supp 2 |
Supp 1 |
Pivot Point |
Res 1 |
Res 2 |
Res 3 |
1.1242 |
1.1282 |
1.1301 |
1.1322 |
1.1341 |
1.1362 |
1.1402 |
|
1.4219 |
1.4301 |
1.4352 |
1.4383 |
1.4434 |
1.4465 |
1.4547 |
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
To receive Ilya's analysis directly via email, please SIGN UP HERE
Contact and follow Ilya on Twitter: @IlyaSpivak