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Euro May Fall as German ZEW Survey Highlights Brexit Spillover

Euro May Fall as German ZEW Survey Highlights Brexit Spillover

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

23:30AUDANZ Roy Morgan Weekly Consumer Conf 114.9-115.2
01:18AUDHIA House Affordability Index (2Q)78.7-81.7
01:30AUDRBA July Meeting Minutes ---

European Session

08:00EURECB Bank Lending Survey --Medium
08:30GBPCPI (MoM) (JUN)0.2%0.2%High
08:30GBPCPI (YoY) (JUN)0.4%0.3%High
08:30GBPCPI Core (YoY) (JUN)1.3%1.2%High
08:30GBPRPI (MoM) (JUN)0.2%0.3%Medium
08:30GBPRPI (YoY) (JUN)1.5%1.4%Medium
08:30GBPRPI Ex Mort Int. Payments (YoY) (JUN)1.5%1.5%Low
08:30GBPPPI Input NSA (MoM) (JUN)1.1%2.6%Low
08:30GBPPPI Input NSA (YoY) (JUN)-0.8%-3.9%Low
08:30GBPPPI Output NSA (MoM) (JUN)0.2%0.1%Medium
08:30GBPPPI Output NSA (YoY) (JUN)-0.5%-0.7%Medium
08:30GBPPPI Output Core NSA (MoM) (JUN)0.1%0.0%Low
08:30GBPPPI Output Core NSA (YoY) (JUN)0.6%0.5%Low
08:30GBPHouse Price Index (YoY) (MAY)-8.2%Low
09:00EUREurozone Construction Output (MoM) (MAY)--0.2%Low
09:00EUREurozone Construction Output (YoY) (MAY)--0.4%Low
09:00EURGerman ZEW Survey Current Situation (JUL)51.854.5High
09:00EURGerman ZEW Survey Expectations (JUL)919.2High
09:00EUREurozone ZEW Survey Expectations (JUL)-20.2High
09:40GBPBOE ILTR Operation Results --Medium

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3

--- Written by Ilya Spivak, Currency Strategist for

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