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Euro May Fall as German ZEW Survey Highlights Brexit Spillover

Euro May Fall as German ZEW Survey Highlights Brexit Spillover

2016-07-19 06:21:00
Ilya Spivak, Head Strategist, APAC
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Talking Points:

  • Euro may fall as German ZEW survey highlights Brexit spillover
  • NZ Dollar drops as RBNZ LVR expansion sets stage for rate cut
  • July RBA minutes trigger easing speculation, sink Aussie Dollar

The German ZEW survey of investor confidence headlines the economic calendar in European trading hours. The forward-looking Expectations gauge is expected to issue the largest drop in eight months. News-flow out of the Euro zone’s largest economy has softened relative to consensus forecasts over the past month, opening the door for an even weaker outcome.

Markets will look to the release to help gauge projected spillover from last month’s UK Brexit referendum. Uncertainty about what the future EU-UK economic relationship will look like is likely have a cooling effect on activity on both sides of the English Channel. Furthermore, the vote’s outcome may embolden eurosceptic forces within the Eurozone.

The Euro seems to be under-pricing these risks. Data that shines a spotlight on them may shake investors out of their complacent state and put significant selling pressure on the single currency. Opportunities to develop this narrative and build follow-through abound this week as the ECB monetary policy announcement and July’s Eurozone flash PMI roundup cross the wires.

The Australian and New Zealand Dollars underperformed in overnight trade. The Kiwi plunged after the RBNZ unveiled an expansion of LVR restrictions aimed at deflating the buoyant housing market. Traders seemed to interpret this to mean that the central bank is setting the stage for a rate cut, a move it has been reluctant to make because lower borrowing costs might buoy real estate further.

The Aussie plunged after the release of minutes from July’s RBA policy meeting. In the document, officials said that the immediately upcoming inflation, housing and labor-market data will help to refine their assessment on the policy outlook. The markets appeared to find distinction between this and the RBA’s heretofore neutral posture, seeing it as foreshowing a rate cut.

Track key short-term price levels and trading patterns with our GSI indicator!

Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

23:30

AUD

ANZ Roy Morgan Weekly Consumer Conf

114.9

-

115.2

01:18

AUD

HIA House Affordability Index (2Q)

78.7

-

81.7

01:30

AUD

RBA July Meeting Minutes

-

-

-

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

08:00

EUR

ECB Bank Lending Survey

-

-

Medium

08:30

GBP

CPI (MoM) (JUN)

0.2%

0.2%

High

08:30

GBP

CPI (YoY) (JUN)

0.4%

0.3%

High

08:30

GBP

CPI Core (YoY) (JUN)

1.3%

1.2%

High

08:30

GBP

RPI (MoM) (JUN)

0.2%

0.3%

Medium

08:30

GBP

RPI (YoY) (JUN)

1.5%

1.4%

Medium

08:30

GBP

RPI Ex Mort Int. Payments (YoY) (JUN)

1.5%

1.5%

Low

08:30

GBP

PPI Input NSA (MoM) (JUN)

1.1%

2.6%

Low

08:30

GBP

PPI Input NSA (YoY) (JUN)

-0.8%

-3.9%

Low

08:30

GBP

PPI Output NSA (MoM) (JUN)

0.2%

0.1%

Medium

08:30

GBP

PPI Output NSA (YoY) (JUN)

-0.5%

-0.7%

Medium

08:30

GBP

PPI Output Core NSA (MoM) (JUN)

0.1%

0.0%

Low

08:30

GBP

PPI Output Core NSA (YoY) (JUN)

0.6%

0.5%

Low

08:30

GBP

House Price Index (YoY) (MAY)

-

8.2%

Low

09:00

EUR

Eurozone Construction Output (MoM) (MAY)

-

-0.2%

Low

09:00

EUR

Eurozone Construction Output (YoY) (MAY)

-

-0.4%

Low

09:00

EUR

German ZEW Survey Current Situation (JUL)

51.8

54.5

High

09:00

EUR

German ZEW Survey Expectations (JUL)

9

19.2

High

09:00

EUR

Eurozone ZEW Survey Expectations (JUL)

-

20.2

High

09:40

GBP

BOE ILTR Operation Results

-

-

Medium

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EURUSD

1.0974

1.1020

1.1047

1.1066

1.1093

1.1112

1.1158

GBPUSD

1.2919

1.3080

1.3168

1.3241

1.3329

1.3402

1.3563

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

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