UK INFLATION HEARINGS GUIDE MARKETS ON US INDEPENDENCE DAY

The global financial markets will likely experience slower volumes on Tuesday as US traders pause for the Independence Day holiday. Investors can still expect a steady stream of market-making developments during the European session.

The Spanish Government kicks off the Tuesday session at 07:00 GMT with a report on unemployment. The number of Spanish workers collecting unemployment benefits is forecast to fall by more than 120,000 last month. Unemployment fell by 111,900 during the previous month.

The Chartered Institute of Purchasing & Supply (CIPS) teams up with IHS Markit for a report on UK construction at 08:30 GMT. The UK construction purchasing managers’ index (PMI) is forecast to dip to 55 in June from 56 the previous month. On the PMI scale, 50 separates expansion from contraction.

The European Commission’s statistical agency will report on the producer price index (PPI) at 09:00 GMT. Factory-gate prices are forecast to decline 0.2% in May after flat-lining the previous month.

The biggest event of the day takes place at 10:00 GMT when the UK Treasury Committee facilitates the Inflation Report Hearings. UK inflationary pressures are rising in the wake of the Brexit vote, something the Bank of England (BOE) says it is willing to accept as it seeks to ensure a stable transition following last year’s referendum.

Finally, European Central Bank (ECB) policymaker Peter Praet is expected to deliver a speech at 12:30 GMT. The ECB has struck a decidedly hawkish tone in recent weeks, spurring the euro to more than one-year highs.

In commodities, precious metals continued to struggle for momentum on Tuesday, with gold and silver prices hovering near two-month lows.

Gold prices have failed to rally even as the US dollar plunged to nearly ten-month lows. Although the greenback rose on Monday, the outlook remains subdued by weak economic fundamentals. The US dollar index (DXY) was last down 0.1% at 96.14. 

EUR/USD

The euro backtracked from 14-month highs on Monday and was last seen trading around 30 pips below the 1.14 US handle. The correction was widely anticipated, given the EUR/USD’s strong overbought signal. Traders can expect a subdued trading session on Tuesday, with price action set to pick up in the latter half of the week.

GBP/USD

Like other currencies, the British pound suffered a broad retreat on Monday as the US dollar stabilized. The GBP/USD exchange rate was last seen trading in the 1.2940 range. Cable faces immediate resistance at the daily top of 1.2955. A break above this level would lead to a re-test of the 5-day moving average near 1.2990.

GOLD

Gold prices face renewed downward pressure as the market searches for direction. Prices are supported near $1,213.00 a troy ounce, which represents the low from May. Stronger than expected US PMI data on Monday triggered a sharp rebound for the dollar, which placed further downward pressure on bullion. The yellow metal faces negative short-term momentum, with price action confirming the bearish bias.