Last week brought a slightly stronger dollar, which was mainly due to a mildly hawkish speeches from the FOMC members. It seems that the Federal Reserve sticks to its plan and is not worried on negative developments in inflation, but the upcoming week could change such view. PCE index due Friday is a crucial measure to watch if the FED is to raise rates again in upcoming months. What’s more, another central bank that could change its policy or signal such move will also look at the inflation print this week. Consumer Price Index from the Eurozone should give traders an answer on whether the ECB could reverse its policy, thus leading to a stronger upward or downward move of the euro.
EMU inflation data – Germany (Thursday, 1:00 pm BST), EMU (Friday, 10:00 am BST)
Not only the FED was surprised by a much weaker inflation print in May. The Eurozone data showed a slower pace of an increase in prices, which slightly halted rally of the shared currency. Nevertheless, the euro is buyout as the market expects the ECB to announce a tapering to its QE before the year’s end. If it is to happen, the data should improve and confirm a better performance of the European economy. That is why traders should look at the EURUSD and German DAX in the week ahead. A stronger print could mean that tighter policy is coming, thus leading to a stronger euro and lower prices of stocks.
ECB forum on central banking – Monday to Wednesday
The ECB Forum on Central Banking is an annual event organised by the European Central Bank. The 2017 Forum will bring together approximately 150 people and focus on investment and growth in advanced economies, a key topic of debate in the areas of both economics and policymaking. Watch out for a panel on Wednesday in which Draghi, Kuroda, Poloz and Carney take part. A rise in volatility on pairs with EUR, JPY, CAD and GBP could be expected.
US data – PCE, Personal Spending, Personal Income (Friday, 1:30 pm BST)
US inflation disappointed significantly last month, but according to the FED it was mainly due to temporary factors. It doesn’t mean, however, that the central bank ignores what’s going on in this matter. The Federal Reserve underlined in its latest statement that is watching inflation developments closely, so it could be said that solid print are needed if rates are to go up again in September. An improvement in Friday’s data could have an impact on the EURUSD, but also on the USDJPY and Gold. The latter broke to the lowest level in weeks, so an upward surprise could push prices even lower.
Today’s calendar focus will be on data from US economy and ECB’s Mario Draghi speech later today as we there is no any significant prints from the Eurozone on Monday.
1:30 pm BST – US: Core durable goods orders MoM and durable goods orders MoM with consensus 0.4 percent and -0.5 percent respectively.
6:30 pm BST – ECB President Mario Draghi speaks in Portugal on European Central Bank Forum