Wednesday promises to be a big one for the forex markets as a vast amount of data is due to be published throughout the course of the session.
The reports for the Eurozone range from the low impact GDP data out of Spain to the eagerly watched inflation report out of Germany.
The day looks likely to see the Euro (EUR) weaken further against the Pound (GBP) and US Dollar (USD) as economists are forecasting that much of the regions data will show a softening.
Increased concerns over geopolitical events such as the war in Ukraine are also likely to weigh upon the currency.
First up on the Eurozone agenda of data releases is the latest consumer confidence report out of France.
The 18 member currency blocs second largest economy has been struggling in recent months, so much so in fact that has begun to be named one of the regions ‘sick men’.
With the nation’s economy struggling we can surmise that consumer confidence fell this month.
Next up is Spain’s GDP data.
The country has shown some signs of improvement since the New Year and economists are forecasting that Spain’s economy expanded by 0.5% on a quarter on quarter basis and by 1.1% on an annual one.
Inflation too is also expected to show some signs of improvement.
After that comes confidence data out of Portugal, Cyprus and the wider Eurozone.
Business confidence is expected to have inched lower in July and consumer confidence for the wider region is forecast to show a sharper decline from the previous month.
Economic sentiment is also expected to weaken.
As the afternoon begins we will see the release of the latest inflation data out of Europe’s largest economy, Germany.
Investors will be watching this report closely as it will give the markets a good indication of the overall inflation situation in the wider region.
Economists are expecting inflation to have slipped from June’s figure of 1% to 0.8%. If so it will raise pressure on the European Central Bank to take more action to tackle the threat of deflation.
Deflation remains a real risk given the growth and inflation outlook. There is a strong perception in the market that the ECB will have to ease its monetary policy further, a move that will further see ECB policy diverge from that of the Bank of England and US Federal Reserve.
With no market moving data due for the Pound, the UK currency is likely to edge higher as a result of Euro weakness.
The US Dollar meanwhile is likely to make broad gains against both currencies if the latest US GDP and ADP employment figures come in positively.
A strong reading from both will increase expectations for the Federal Reserve to raise interest rates sooner than initially expected.
Earlier this month Fed Chair Janet Yellen indicated that rates could rise sooner if the recovery in the labour market continued.
UPDATED 15:20 GMT 30 July, 2014
EUR/GBP Climbs, EUR/USD Falls
Following the publication of German inflation figures the Euro to Pound exchange rate was ever s0 slightly stronger.
Economists were proved correct in their assumption that German inflation would ease from 1.0% to 0.8%.
The Euro to US Dollar exchange rate however came under considerable pressure after the US published far-stronger-than-anticipated US growth figures for the second quarter of the year.
News that the US economy expanded at an annualised rate of 0.4% in the second quarter saw the Euro to US Dollar (EUR/USD) currency pairing slide by 0.25%.
The Euro is likely to retain declines against the US Dollar ahead of the publication of the Eurozone’s Consumer Price Index.
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