European Data to Provide Fresh Catalysts for Euro, Pound
The weekly data dump continues on Wednesday, with broad measures of European economic growth scheduled for release. As we’ve seen recently, currencies tied to the region could experience volatility in the wake of fresh economic cues.
The first major release comes our way at 04:00 GMT when Germany’s Federal Statistical Office releases the latest retail sales report. Receipts at German retail stores are projected to grow 0.2% in April and 2.3% annually.
Four hours later, the German government will release employment figures for the month of May. The number of unemployed Germans is forecast to drop by 15,000. The seasonally adjusted unemployment rate is also expected to drop to 5.7% from 5.8%.
Eurozone data will continue at 09:00 GMT with reports on consumer inflation and unemployment for the 19-member economy. The consumer price index (CPI) is forecast to weaken to 1.5% in the 12 months through May. Core inflation is also expected to slip to 1% from 1.2% year-over-year.
Traders will also be monitoring a pair of data releases from the United Kingdom scheduled for 08:30 GMT. The UK Office for National Statistics will release the April consumer credit report. Separately, the Bank of England (BOE) will publish its monthly mortgage approvals report separately.
London trading could also see a growing emphasis on crude oil after a volatile three days. Brent crude futures closed down 49 cents, or 0.9%, at $51.80 a barrel on London’s ICE Futures exchange on Tuesday.
A broad rally in the euro paused this week after disappointing German inflation data underscored the need for continued stimulus. The EUR/USD exchange rate is trading in the 1.1170 range, which is more than 80 pips below last week’s swing high. Immediate resistance is located at 1.1193, the high from 30 May. A clean break above this level would target the 23 May high of 1.1235. On the downside, immediate support is located at the Tuesday low of 1.110.
The EUR/GBP underwent bearish consolidation at the start of the week, reflecting prevailing weakness in the common currency. However, the pair remains in an uptrend, which suggests a retest of the March high near 0.8790 is a distinct possibility. Fundamental factors also point to continued upside ahead of the UK parliamentary election next month.
Despite the decline on Tuesday, Brent futures are in a firm uptrend after a flash crash last week. This makes the 23 May settlement high of $54.15 the next likely target for the bulls. The path higher could be choppy, as traders weigh the latest batch of inventory data from the US Energy Information Administration (EIA) later in the week. Supply-demand expectations will continue to drive energy prices amid OPEC’s latest effort to rebalance the market