Eurozone in focus
After a busy week for the Dollar, focus looks most likely to turn to the Euro as we approach June. The next ECB decision is due to be published on June 6th. As present, the ECB looks near certain to cut rates at this meeting. There remain risks of course to that expectation including rising wholesale energy costs and any surprises from the remaining data items due for release between now and the decision. However, in spite of a Federal Reserve that looks set to hold rates in restrictive territory for longer, we could see frequent if not consecutive cuts from the ECB in the meetings ahead.
The most important data release for the week ahead will be Eurozone headline and core CPI inflation readings on Friday. As is customary with Euro area data releases, we will also observe a handful of national data releases ahead of the group-level statistic. Whilst these should prove less market sensitive than their group level counterparts, they can often be seen as indicators of the aggregated data. Therefore, don’t rule out some volatility in the approach to the end of the trading week. Taking a lesser but still significant role in mapping the ECB June decision will be unemployment figures due for release on Thursday.
The Euro could prove most vulnerable this week should inflation data read below expectations. Similarly, should the unemployment rate be read higher than expected, expect some Euro downside movement. Given that at the time of writing only three 25 basis-point cuts are currently priced in, there is significant scope for monetary easing expectations to build given any sense of economic vulnerability. On the other hand, should the market be delivered solid or above expectation economic data later this week, we would expect only a limited tailwind to be delivered to the Euro.
Discussion and Analysis by Charles Porter
Click Here to Subscribe to the SGM-FX Newsletter
Related Insights
Daily Brief – EU Stagflation
Humphrey Percy
Mon 25 Nov 2024
EU Stagflation With inflation blipping up and business activity turning down, the S word is back on the table. Not only manufacturing but also the services sector fell sharply in November with the Purchasing Managers Index at its lowest level this year. The EUR facing a rampant Dollar is increasingly undermined by its own weakening […]
Daily Brief – UK Housing Market
Humphrey Percy
Mon 9 Dec 2024
UK Housing Market Best performance in the past two years etc etc with the Halifax average house price up 4.8% as at the end of November. Without being curmudgeonly or seasonally Scroogelike the real house price performance allowing for inflation in the last 2 years is minus 10.5% for all those mistakenly regarding their house […]
Daily Brief – UK Equities
Humphrey Percy
Fri 6 Dec 2024
UK Equities We wrote recently about a European wide Santa Rally in Equities despite the political headwinds in Continental Europe, but it looks as if the UK market has finally managed to break out on the top side of its range and without wishing to jinx it, may be set fair. One well known Fund […]
