CURRENCY MARKETS BRACE FOR DATA DELUGE AMID FOMC
Economic data and monetary policy will headline Tuesday’s session, as traders divide their attention between a hefty European release schedule and a meeting of the Federal Reserve in Washington.
The data dump begins at 08:30 GMT with a deluge of British inflation figures, including the retail price index, producer price index and consumer price index. Consumer inflation is forecast to grow 2.7% annually in May, unchanged from the previous month. Producer prices are forecast to expand at a steady 3.6% annualized rate, while retail prices are expected to rise 3.5% over the same period.
At 09:00 GMT, attention shifts from the UK to the broader Eurozone with reports on investor sentiment. The ZEW Institute will release its economic sentiment survey for Germany and the 19-member Eurozone economy. Both figures are expected to improve this month, signaling stronger confidence in the regional economy.
The US Labor Department will report on producer inflation at 12:30 GMT, which is the start of the North American session. Factory-gate prices are forecast to increase 2.4% annually in May, down slightly from 2.5% the previous month.
In commodities, crude prices staged a recovery on Monday, but settled well short of intraday highs. Brent crude futures extended the recovery efforts early on Tuesday ahead of key inventory data at the conclusion of the North American session.
The American Petroleum Institute (API) will release its weekly inventory report at 20:30 GMT. The industry group reported a 4.62 million-barrel draw during the previous week, which confounded an official report from the US Energy Information Administration (EIA) showing a 3.3 million-barrel build.
In terms of monetary policy, the Federal Reserve will begin its two-day policy meeting on Tuesday, with an official rate announcement scheduled the following afternoon.
The EUR/USD exchange rate fell back below 1.1200 in overnight trading, a sign of diminishing momentum for the common currency. Despite recent weakness, the pair is unlikely to set new lows without a clear fundamental catalyst. Although the Fed is widely expected to raise rates, this has done very little to shore up the US dollar. The EUR/USD faces immediate resistance at 1.1210. On the downside, immediate support is located at the daily low of 1.1190.
The British pound declined sharply in overnight trading, reaching a session low of 1.2640 US. That puts cable on track for its lowest settlement since mid-April. The GBP/USD faces immediate support levels at the daily low. Immediate resistance is seen at the daily high of 1.2680. The short-term outlook is bearish, although the extent of the downtrend will depend on upcoming data releases.
Brent crude, the international futures benchmark was trading nearly half a percent higher at the start of European trading. The contract remains in a prolonged downtrend following a series of lower lows that sent prices tumbling toward $47.45 a barrel. Immediate resistance is located at $49.15, the intraday high from Monday.