• Will US PCE inflation data show a reason for four hikes?

  • Flash inflation from EMU to be released on Thursday

  • Earnings growth in the US expected to remain unchanged

Following a week where geopolitical developments dominated the markets we are in for an interesting week in terms of reports, especially for the EURUSD. Inflation on both fronts and the always anticipated NFP report will shape the outlook for the pair. On Monday though no major macroeconomic releases have been planned. Bank of France Governor Francois Villeroy de Galhau will deliver his speech in the morning (8:00 am BST).

The NFP report (Friday, 1:30pm GMT)

Currency pairs like EURUSD or USDJPY have been driven by a widening spread between bond yields as of late. Now that the US 10-year yield has found the 3% level hard to crack the data will gain relevance. Obviously the monthly NFP is always in the spotlight and traders will want to see a stronger reading than last time when job creation (+164k) and wage growth (+2.6% y/y) disappointed. Another weak report could end a period of US recovery. Affected markets: USDJPY, US500.   

US PCE inflation data (Thursday, 1:30pm GMT)

The CPI data for April showed an acceleration in price growth to 2.5% y/y but the target for the FOMC is PCE inflation and members pay attention to the core measure that leaves out volatile and supply driven food and energy prices. Such measure was at 1.9% y/y in March and is expected to actually decelerate to 1.8% in April. Only a rise of this measure above 2% could really force the Fed to speed up the tightening process. Affected markets: TNOTE, GOLD.

EMU flash inflation (Wednesday and Thursday)

European data had been overlooked by the markets for quite a while on the assumption that the recovery was on its way and the ECB will consider interest rate increases in 2019. However, the latest weakness in the PMI has investors concerned and naturally they will pay more attention to the incoming reports. This week the key reports will present flash inflation. The EMU wide HICP estimate is on Thursday but we will get glimpses of that figure via HICP for Spain and Germany on Wednesday. Affected markets: EURUSD, DE30.

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Euro tries to pare recent weakness within the range of the mid term support zone. Will the common currency manage to climb back above the 1.17 handle? Source: xStation5