TRADERS BRACE FOR INFLATION TUESDAY
The global financial markets will be drawn to headline inflation data on Tuesday, with final reports expected from the Eurozone and United Kingdom. A survey of German investor sentiment will also make headlines after a quiet start to the week.
Action begins at 08:00 GMT with a report on Italian trade. The Eurozone’s third-largest economy is expected to show an August trade surplus of €4.23 billion, down from €6.56 billion the month before.
A deluge of British inflation data will make its way through the financial markets at 08:30 GMT, including the retail price index, the producer price index and the consumer price index. Consumer prices are forecast to rise 3% annually in September, while core prices are projected to rise 2.8% over the same period.
Eurostat will produce euro-wide CPI data at 10:00 GMT. Annual CPI in the currency region is forecast to rise 1.5%. Core inflation is projected to come in at 1.1%, according to estimates.
About an hour earlier, the ZEW Institute will release its economic sentiment index for German and Eurozone investors. Confidence among investors is expected to rise in both jurisdictions.
Three central bankers will also deliver speeches on Tuesday, beginning at 08:00 GMT with Vitor Constancio, the Vice President of the European Central Bank (ECB). The ECB’s Peter Praet, who has served on the Executive Board since 2011, will also deliver a speech at 09:30 GMT.
Finally, Bank of England (BOE) Governor Mark Carney will deliver remarks at 10:15 GMT.
Europe’s common currency resumed its descent on Monday, falling back below 1.1800 US. The EUR/USD could receive a boost from Eurozone data on Tuesday. An upward correction depends largely on the pair’s ability to reclaim the 1.1810 level. This would spark a rally back toward the mid-1.18 region.
The British pound steadied on Monday, trading in the mid-1.32 region against the dollar. Cable has been stuck in a 100-pip range between 1.3250 and 1.3350 for the past week, as investors await fresh details concerning Brexit and the BOE. Rangebound is the name of the game for now. With neither the pound nor the greenback showing signs of pulling ahead.
The dollar is off to a solid start against the yen this week, with the USD/JPY climbing back above 112.00 on Monday. The pair continues to hold that critical line, although upside momentum appears to be limited at time of writing. Looking at the rest of the week, the yen may carry favour with investors ahead of Japanese general election on 22 October. Prime Minister Shinzo Abe is expected to deliver a solid performance in his bid for re-election. For investors, this likely means the continuation of ultra-loose monetary policy.