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With the Euro on a tear against its Anglo-American counterparts, this week investors will be keeping an eye out for an all-important trend change. Against the US Dollar, the European single currency is trading at a 23-month high and threatening to break out of a significant trading range.
The Euro hasn’t traded above $1.1715 since August 2015, however with US political tensions at an all-time high and a trend of weak macro data releases, the catalyst for a break-out could be drawn from revelations stateside.
On the European side of things, we have to wait until Friday for the major releases that could drive the Euro higher. Eurozone Confidence Indicators (10am) provide a backdrop for the mindset of Europeans while German CPI (1pm) could aid hawkish sentiment at the European Central Bank.
However, before we reach Friday’s climax, Wednesday’s US FOMC monetary policy update (7pm) is likely to have a significant impact on FX space, with markets looking for clarity on timing for the trimming of the central bank’s bloated balance sheet. While the majority of voting policymakers support one further rate hike this year, the absence of a press conference means it is highly unlikely a move will be made this week.
However, it does provide a platform to drip feed further information into the market place with regards to its next rate hike and perhaps even a loose date for the all-important balance sheet reduction, although this is not expected to be confirmed until the September meeting and press conference.
As a result, every detail of the policy statement provided will be scrutinised for an indication of the tone of the meeting, with the potential for both explicit and implicit signals alike.
If the FOMC fails to inspire US dollar bullishness, then all eyes will be cast upon US Q2 GDP (Friday; 1:30pm) to lift market sentiment. Markets are expecting a reading of 2.6%, the highest reading since Q3 2016 and of President Trump’s tenure so far. With tensions in Washington reaching fever pitch, a strong GDP reading could see bearishness in the US dollar abate as it trades a fresh 13-month low.
The UK’s equivalent GDP reading is released on Wednesday (9:30am) amid a backdrop of waning sentiment for the UK economy. The International Monetary Fund (IMF) has downgraded its outlook for the key macroeconomic data print, describing its recent performance as ‘tepid’. The institution has cut its outlook for UK economic growth this year from April’s 2.0% to 1.7% as it cites Brexit uncertainty
This comes as UK Parliament begins its Summer recess, and Prime Minister Theresa May having survived the first supposed deadline for her departure, Chancellor Phillip Hammond will be taking over the reins in her absence.
The chancellor – nicknamed ‘Spreadsheet Phil’ for his attention to detail – will be hoping to inspire confidence in the UK economy during the 6-week holiday for MPs, reiterating his party’s commitment to increasing economic growth. Although with the IMF’s vote of no confidence, is it too little, too late for the UK economy and Sterling?
Other notable data releases this week include US Consumer Confidence (Tuesday; 3pm), US New Home Sales (Wednesday; 3pm), German GfK Consumer Confidence (7am), UK CBI Sales (Thursday, 11am), UK GfK Consumer Confidence (midnight, Friday) and US Michigan Consumer Sentiment (Friday; 3pm).
Key data this week (Sign up here to receive our daily live macro-calendar)
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UK Economic Announcements
11:00 CBI Trends & Business Optimism
Intl Economic Announcements
09:00 IFO Surveys (DE)
14:00 House Price Index (US)
15:00 Consumer Confidence, Richmond Fed Manufacturing (US)
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UK Economic Announcements
09:30 GDP, Index of Services, BBA Mortgages
Intl Economic Announcements
12:00 MBA Mortgage Applications (US)
14:45 Services PMI (US)
15:00 New Home Sales (US)
15:30 Oil Inventories (US)
19:00 FOMC Monetary Policy Decision (US)
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UK Economic Announcements
11:00 CBI Sales
Intl Economic Announcements
07:00 GfK Consumer Confidence (DE)
13:30 Durable Goods, Chicago Fed Activity Index (US)
13:30 Weekly Jobless Claims (US)
14:00 S&P/Case-Shiller Home Price (US)
17:00 Kansas Fed Manufacturing Index (US)
UK Economic Announcements
00:01 GfK Consumer Confidence
Intl Economic Announcements
00:30 CPI, Unemployment (JP)
06:30 GDP (FR)
07:00 Import Prices (DE)
07:45 CPI (FR)
10:00 Confidence Indicators (EZ)
13:00 CPI (DE)
13:30 GDP, Personal Consumption (US)
15:00 Michigan Consumer Sentiment (US)
18:00 Baker Hughes Rig Count (US)
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