EUROPEAN INFLATION DATA ON DECK TUESDAY
Action begins at 07:00 GMT with a pair of German reports centered on inflation. The wholesale price index will provide a snapshot of wholesale values in Europe’s largest economy. Meanwhile, the consumer price index (CPI) will show the average price change for all goods and services purchased by German households. The CPI indicator is forecast to rise 0.6% in December, which translates into a year-over-year gain of 1.7%.
The harmonized index of consumer prices (HICP), which tracks German inflation using a method consistent throughout the European Union, is expected to climb 1.6% annually.
Forty-five minutes later, the French government will provide a reading of the monthly budget for November. Paris ran a deficit of €77.2 billion in October.
The Italian government will also report on regional and global trade at 09:00 GMT. One hour later, the government will report.
Shifting gears to the United Kingdom, the Office for National Statistics will release a spate of inflation figures at 09:30 GMT, including the retail price index, producer price index and consumer price index. Most traders will be keeping a close eye on CPI. The producer price index is projected to climb 6% year-over-year.
Consumer prices in the UK are forecast to climb 3.2% annually in December, up from 3.1% the previous month. Rising inflation has forced the Bank of England (BOE) to raise interest rates after cutting them following the 2016 Brexit vote.
There are no major economic releases scheduled in the United States on Monday. Markets were closed at the start of the week for Martin Luther King Jr. Day. The US government will report on industrial production and capacity utilization on Tuesday, followed by a report on housing starts and building permits. Separately, the Philadelphia Federal Reserve Bank of Philadelphia will issue its monthly manufacturing survey.
The Swiss National Bank’s Chairman Thomas Jordan will issue a speech at 17:00 GMT.
Europe’s common currency held steady on Monday, as the dollar took a pause on the holiday. The EUR/USD exchange rate was last seen trading at 1.2262, where it was little changed from the previous close. The pair faces immediate support at 1.2220, followed by 1.2180. On the opposite side of the spectrum, resistance is likely seen at 1.2300 followed by 1.2340.
Cable continued higher on Monday, with prices briefly crossing 1.3800 for the first time in 18 months. The GBP/USD was last seen trading at 1.3791. The pair has started 2018 on a high note, and the bulls are now eyeing the psychological 1.4000 level. Along the way, the pair is likely to face resistance at 1.3945.
The USD/JPY is in a firm downtrend, as the dollar continues to lose traction against a basket of world currencies. Th USD/JPY rebounded 0.3% on Tuesday, but continued to trade below 111.000. The pair faces immediate resistance at 111.15.