Euro and Pound to Look Past UK CPI and ZEW Data, US Dollar Sinks

2016-08-16 06:52:00

Talking Points:

US Dollar faces broad selling pressure before July’s inflation figures
Euro, British Pound may overlook UK CPI and German ZEW reports
Yen gains as Japanese stocks decline, NZ Dollar higher after bill sale

The Yen outperformed in overnight trade as Japan’s benchmark Nikkei 225 stock index declined, boosting demand for the anti-risk currency. The New Zealand Dollar rallied as auction results showed rising demand for short-term government debt compared with a sale of analogous paper two weeks ago.

The US Dollar traded broadly lower as front-end borrowing costs declined, hinting at ebbing Fed rate hike bets ahead of the upcoming release of July’s US CPI figures. The core year-on-year inflation rate is expected to remain unchanged from the prior month at 2.3 percent.

US economic news-flow has increasingly underperformed relative to consensus forecasts over recent weeks, opening the door for a downside surprise. Such a result may reduce the priced-in probability of tightening before year-end. As it stands, traders assign narrowly better-than-even odds that stimulus withdrawal will have to wait until 2017.

The UK CPI report and Germany’s ZEW survey of analyst sentiment headline the European data docket. The former is set to show the headline price growth rate held at 0.5 percent last month while the latter is projected to show a slight improvement in expectations.

On balance, neither outcome is likely to deliver a lasting response from the Euro and the British Pound considering their limited implications for near-term monetary policy trends. The ECB probably feels no need to deviate from the established trajectory after a marked improvement in financial conditions since the Brexit referendum scare. Meanwhile, the BOE is likely in wait-and-see mode after just boosting stimulus.

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Asia Session

GMT	CCY	EVENT	ACT	EXP	PREV
23:30	AUD	Weekly Consumer Confidence Index (AUG)	117.6	-	114.7
01:30	AUD	RBA Aug. Meeting Minutes	-	-	-
01:30	AUD	New Motor Vehicle Sales (MoM) (JUL)	-1.3%	-	3.5%
01:30	AUD	New Motor Vehicle Sales (YoY) (JUL)	1.6%	-	2.3%
03:00	NZD	Non Resident Bond Holdings (JUL)	67.2%	-	67.4%
04:00	JPY	Tokyo Condominium Sales (YoY) (JUL)	-30.7%	-	-12.9%

European Session

GMT	CCY	EVENT	EXP	PREV	IMPACT
08:30	GBP	CPI (MoM) (JUL)	-0.1%	0.2%	High
08:30	GBP	CPI (YoY) (JUL)	0.5%	0.5%	High
08:30	GBP	CPI Core (YoY) (JUL)	1.4%	1.4%	High
08:30	GBP	RPI (MoM) (JUL)	-0.1%	0.4%	Low
08:30	GBP	RPI (YoY) (JUL)	1.7%	1.6%	Low
08:30	GBP	RPI Ex Mort Int. Payments (YoY) (JUL)	1.7%	1.7%	Low
08:30	GBP	PPI Input NSA (MoM) (JUL)	1.0%	1.8%	Low
08:30	GBP	PPI Input NSA (YoY) (JUL)	2.0%	-0.5%	Low
08:30	GBP	PPI Output NSA (MoM) (JUL)	0.2%	0.2%	Medium
08:30	GBP	PPI Output NSA (YoY) (JUL)	0.0%	-0.4%	Medium
08:30	GBP	PPI Output Core NSA (MoM) (JUL)	0.1%	0.1%	Low
08:30	GBP	PPI Output Core NSA (YoY) (JUL)	0.8%	0.7%	Low
08:30	GBP	House Price Index (YoY) (JUN)	-	8.1%	Low
09:00	EUR	Eurozone Trade Balance SA (JUN)	25.3b	24.5b	Low
09:00	EUR	Eurozone Trade Balance NSA (JUN)	26.0b	24.6b	Low
09:00	EUR	German ZEW Survey Current Situation (AUG)	50.2	49.8	Medium
09:00	EUR	German ZEW Survey Expectations (AUG)	2	-6.8	Medium
09:00	EUR	Eurozone ZEW Survey Expectations (AUG)	-	-14.7	Medium
09:40	GBP	BOE ILTR Operation Results	-	-	Low