Euro Open: Will German CPI Give Trichet Room for Rate Cuts?
New Zealand’s Trade Deficit surprised to the upside as weakening domestic demand reduced import volumes. Australian New Homes Sales surged higher as the mining boom produced record immigration levels. Preliminary estimates of Germany’s Consumer Prices will dominate attention in European trading hours. A downside surprise would put pressure on the ECB to abandon their hawkish stance as the 15-nation bloc inches closer to recession.
Key Overnight Developments
• New Zealand Trade Deficit Widens Less Than Forecast
• Australian Home Sales Surge on Immigration
The Euro inched higher overnight to test above 1.57 late into the session. DailyFX Technical Strategist Jaime Saettele reported that the magnitude of recent declines is beginning to threaten the long-term bullish bias. That said, the pair is still expected to continue on to a sustained break above the 1.60 mark to target 1.6325 as long as price remains above 1.5611. Near-term resistance is seen at 1.5736. Sterling remained range-bound, oscillating around the 1.99 level. The overall bias is now seen as bearish. Resistance stands at 2.0075, while support is established in the 1.9550-1.9600 area.
Asia Session Highlights
New Zealand’s Trade Deficit surprised to the upside, widening to print at -223 million versus -350 million expected. Weakening domestic demand reduced import volumes. The economy waist-deep into a major economic downturn: national income contracted in the first quarter and is expected to do so again in the second, while consumer confidence stands at record lows. The release offered little by way of new insights into the NZDUSD macro outlook and the pair predictably ignored the release.
Australia’s calendar produced a notable surprise as HIA New Homes Sales surged higher, printing at 4.0% in June following a decline of -0.5% in May. Record immigration levels proved to be a wild card, pushing sales upward even as a slowing economy and record-high borrowing costs make housing less affordable. New migrants have flocked to Australia to take part in the mining boom stoked by China’s demand for coal and iron ore. NAB Business Confidence fell in line with the broad theme of economic slowdown in the larger antipodean nation, printing at -8 in the second quarter versus -4 in the preceding period.
Euro Session: What to Expect
Preliminary estimates of Germany’s Consumer Prices will dominate attention in European trading hours. Expectations call for the metric to remain flat at 3.4% in the year to July. Traders will be most responsive to a downside surprise, as this would put pressure on the ECB to abandon their hawkish stance as the 15-nation bloc inches closer to recession.
Predictably, Nationwide House Prices are expected to decline further as the UK continues to experience a profound housing slump. Forecasts call for annualized price growth to contract -7.2% in the year to July versus -6.3% in the preceding month.
The session closes with the August edition of Germany’s GfK Consumer Confidence Survey. The metric will offer a timely look at current sentiment, with expectations favoring continued slowdown in private demand for a reading at 3.5 versus 3.9 in July. On balance, this release is unlikely to have much market-moving potential: economic slowdown in the Euro-Zone’s largest economy is largely a given at this point.
To contact Ilya regarding this or other articles he has authored, please email him at firstname.lastname@example.org.