Talking Points:

  • New Zealand Dollar vulnerable ahead of inflation data
  • Yen may fall as BOJ policymakers dial up dovish rhetoric
  • Euro might wilt unless ECB hints at QE taper up ahead

Where are major currencies, gold and crude oil prices going in Q3? See our forecasts!

The New Zealand Dollar may turn lower after an ominous shift in sentiment studies before local CPI figures cross the wires. The baseline year-on-year inflation rate is expected to slow in the second quarter, which may push out RBNZ rate hike bets and weigh on the currency.

Meanwhile, UK CPI figures are forecast to show inflation held steady at 2.9 percent on-year in June. A recent run of disappointing data outcomes warns that analysts' models may be overly rosy, opening the door for more downside surprises. A soft CPI print might weigh heavily on the Pound.

The Bank of Japan might turn up the volume on dovish rhetoric - sending the Yen lower - as policymakers struggle with the fruits of their own success. Growth seems to be firming and inflation is edging higher but a parallel rise in bond yields is challenging officials' commitment to keep them capped.

An ECB policy announcement is also on tap. Traders will parse the accompanying statement as well as comments from President Mario Draghi for clues pointing to further tapering of QE asset purchases. The absence of a discernible if modest hawkish pivot may leave them disappointed, hurting the Euro.

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

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