Skip to content
News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View more
British Pound Volatility Likelier on Firm vs. Soft UK CPI Data

British Pound Volatility Likelier on Firm vs. Soft UK CPI Data

Ilya Spivak, Head Strategist, APAC

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

GMTCCYEVENTACTEXPPREV
23:30AUDWeekly Consumer Confidence Index (MAY 15)115.1-113.9
01:30AUDRBA May Meeting Minutes ---
01:30AUDNew Motor Vehicle Sales (MoM) (MAY)-2.5%-2.2%
01:30AUDNew Motor Vehicle Sales (YoY) (MAY)2.4%-4.2%
03:00NZD2Yr Inflation Expectation (2Q)1.64%-1.63%
04:30JPYIndustrial Production (YoY) (MAR F)0.2%-0.1%
04:30JPYIndustrial Production (MoM) (MAR F)3.8%-3.6%
04:30JPYCapacity Utilization (MoM) (MAR)3.2%--5.4%

European Session

GMTCCYEVENTEXPPREVIMPACT
07:00CHFTotal Sight Deposits (MAY 13)-491.7bLow
07:00CHFDomestic Sight Deposits (MAY 13)-419.5bLow
07:15CHFProducer & Import Prices (MoM) (MAY)0.1%0.0%Low
07:15CHFProducer & Import Prices (YoY) (MAY)-2.7%-4.7%Low
08:30GBPCPI (MoM) (MAY)0.3%0.4%High
08:30GBPCPI (YoY) (MAY)0.5%0.5%High
08:30GBPCPI Core (YoY) (MAY)1.4%1.5%High
08:30GBPRPI (MoM) (MAY)0.3%0.4%Medium
08:30GBPRPI (YoY) (MAY)1.5%1.6%Medium
08:30GBPRPI Ex Mort Int. Payments (YoY) (MAY)1.6%1.6%Low
08:30GBPPPI Input NSA (MoM) (MAY)1.1%2.0%Low
08:30GBPPPI Input NSA (YoY) (MAY)-6.7%-6.5%Low
08:30GBPPPI Output NSA (MoM) (MAY)0.2%0.3%Medium
08:30GBPPPI Output NSA (YoY) (MAY)-0.8%-0.9%Medium
08:30GBPPPI Output Core NSA (MoM) (MAY)0.1%0.1%Low
08:30GBPPPI Output Core NSA (YoY) (MAY)0.3%0.2%Low
08:30GBPONS House Price (YoY) (MAR)-7.6%Low
09:00EUREurozone Trade Balance SA (MAR)22.0b20.2bLow
09:00EUREurozone Trade Balance NSA (MAR)-19.0bLow

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EUR/USD1.12421.12821.13011.13221.13411.13621.1402
GBP/USD1.42191.43011.43521.43831.44341.44651.4547

--- 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

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

DISCLOSURES