FED’S POWELL, ECONOMIC DATA IN THE SPOTLIGHT WEDNESDAY
A combination of economic data and monetary policy will headline the newswire on Wednesday. On the central bank front, Federal Reserve Chairman Jerome Powell will embark on day two of Congressional testimony following a meeting of the Senate Banking Committee on Tuesday.
The UK’s Office for National Statistics gets the ball rolling on Wednesday with a deluge of inflation data at 08:30 GMT. National Statistics will report on retail prices, producer prices and consumer inflation in the morning session. The UK’s consumer price index (CPI) likely rose 0.2% for June, translating into an annualized gain of 2.6%. So-called core inflation, which strips away volatile goods such as food and energy, likely rose 2.2% year-over-year.
Later in the session, the European Commission’s statistical agency will release final CPI numbers for June. Euro-wide inflation is forecast to rise 2% year-over-year.
Shifting gears to North America, the US Commerce Department will report on housing starts and building permits at 12:30 GMT. Housing starts are forecast to have declined 2.2% in June to a seasonally adjusted 1.32 million-unit pace. Building permits, which are a proxy for future construction plans, likely rose 6% to 1.33 million.
Commodity traders will be keeping close tabs on weekly crude inventory data courtesy of the US Energy Information Administration (EIA). The EIA is forecast to show a weekly drawdown of 3.5 million barrels for the period ended 13 July, based on a median estimate of economists.
Jerome Powell of the Federal Reserve will deliver round two of Congressional testimony beginning at 14:00 GMT. On Tuesday, the Fed chief gave an optimistic view of economic growth and inflation. For traders, this means short-term interest rates are likely to keep rising.
After surging to one-week highs, Europe’s common currency reversed course on Tuesday to finish sharply lower. EUR/USD gave back roughly 90 pips to settle back in the 1.1650 range. The pair now faces immediate resistance near the 21-day simple moving average of 1.1663. This was previously a support level. From there, 1.1700 is likely to offer firm resistance.
Cable plunged 160 pips on Tuesday after prices made a double-top formation earlier in the day. GBP/USD fell from a high of 1.3268 all the way back down to the low 1.300s. The pair now trades just above the 1.3100 level. Short-term technical indicators have been rendered obsolete for the moment, though fundamental drivers tied to Brexit and US monetary policy could set the tone moving forward.
The Canadian dollar initially held firm in the face of falling oil prices, but a Fed-driven greenback soon encroached on that stability. USD/CAD is back to trading above 1.3200, which has opened up a bearish bias against the loonie. Investors should keep a close eye on commodity prices to gauge the direction of this pair.