US Dollar, EURUSD, Euro, US Income Data – TALKING POINTS
- Euro may fall if Eurozone jobs data, core CPI slips
- Traders will be closely watching US PCE deflator
- Consumption, income data also high-profile events
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The Euro may struggle to rise against the US Dollar if Eurozone unemployment and CPI data fall short of forecasts and reinforce the notion that the ECB needs to deliver stimulative measures. EUR/USD’s pain may be amplified if US consumption, income and PCE deflator data show weakness and fuel the demand for liquidity and anti-risk assets like the Greenback.
The Eurozone unemployment rate is expected to stay at 7.5 percent, unchanged from the previous reading. CPI publications will also garner the attention of traders as economic activity in the region continues to cool. Germany’s economy – unofficially labeled the steam engine of Europe – showed a contraction in the second quarter on a seasonally-adjusted basis, sparking fears that stimulative measures may be seriously considered.
The European central bank is widely expected to deliver credit easing next month after soon-to-be-appointed ECB President Christine Lagarde hinted she may further push rates into negative territory. Traders will be closely watching the September 12 meeting where policymakers are expected to deliver a rate cut and comment on the region’s economic prospects.
In the US, traders will be eager to see the publication of US consumption and income data. Considering almost 80 percent of the economy is powered by consumers, it is no wonder economists and analysts will be following this indicator closely. Investors will also be keen to see the publication of the PCE deflator, the Fed’s favored inflation gauge and a barometer of progress toward meeting its statutory mandate.
A poor reading out of this particular data point may fuel what are already-aggressive rate cut expectations from the Fed. The central bank’s position for months has been that despite the outlook “deteriorating” – to quote Jerome Powell at the Jackson Hole symposium – the Fed is still data dependent. Despite this reiterated message, markets continue to price in rate cut bets which likely is setting them up for disappointment.
CHART OF THE DAY: Will ECB Rate Decision, US Data Catalyze EUR/USD Break Below Key Support?
EUR/USD chart created using TradingView
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--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com
To contact Dimitri, use the comments section below or @ZabelinDimitri on Twitter
