Bleak Japanese data failed to stir the Yen overnight. European inflation metrics will command attention overnight, with traders most responsive to downside surprises that would put pressure on the ECB to issue rate cuts as the 15-nation bloc inches closer to recession. On balance, recent reversals in risk sentiment may see the markets focused on rebounding crude prices and the US Consumer Confidence release due late into the session.
[B][U]Key Overnight Developments[/U]
• Japanese Jobless Rate Rises Unexpectedly
• Euro, Sterling Consolidate Daytime Gains[/B]
[U][B]Critical Levels[/B][/U]
The Euro oscillated in a tight, 15-pip range overnight having gained on the dollar in New York hours. DailyFX Technical Currency Strategist Jamie Saettele reports the bias has shifted to favor the downside. Near-term support remains at 1.5611 with resistance near 1.5800. Sterling moved lower to test 1.9920 having rallied on broad dollar weakness in the US session. Support is found in the 1.9550-1.96 area while resistance remains at 2.0075.
[U][B]Asia Session Highlights[/B][/U]
Bleak Japanese data failed to stir the Yen overnight. The [B]Jobless Rate[/B] ticked higher unexpectedly in June, printing at a 2-year high of 4.1% versus 4.0% expected. Businesses have been reluctant to expand capacity as demand shrinks domestically and abroad. Last week, we saw Japan’s exports fall to the US (-15.4%), Europe (-11.2%) and even China (1.5% in June vs. 8.1% in May). Meanwhile, Japanese consumer confidence stands at the lowest level in at least 26 years.
[B]Retail Trade[/B] figures printed higher at 0.3% in the year to June versus expectations of a -0.6% contraction. The metric offered little by way of positive news for the world’s second-largest economy: the headline figure was inflated by rising food and oil prices rather than a pickup in domestic demand. Fuel sales rose 3.0% in June as petrol reached a record ¥172 per liter, while food sales rose 3.6%.
[U][B]Euro Session: What to Expect[/B][/U]
Traders will once again be looking to the release of the preliminary estimate of Germany’s [B]Consumer Price Index[/B]. The metric does not have a particular time of release, but is expected in the coming days. Expectations call for the metric to remain flat at 3.4% in the year to July. French [B]Producer Prices[/B] are set to climb to record-high with a print at 7.3% in the year to June. The metric is seen as a leading indicator for consumer prices and the overall inflation level because firms tend to pass on higher production costs by raising the purchase prices of final goods. Traders will be most responsive to downside surprises for both of the aforementioned releases. Higher Euro-Zone inflation is a given at this point, while softer numbers would put pressure on the ECB to issue rate cuts as the 15-nation bloc inches closer to recession.
Switzerland’s [B]UBS Consumption Indicator[/B] will likely continue downward having printed at the lowest level in 17 months in May. The accompanying report noted the decline was owed to “deteriorating consumer confidence as well as weaker business activity in the retail sector.” Notably, the metric diverged sharply from May’s Retail Sales figure as that release surprised to the upside with a print at 7.4% versus 3.8% expected. To that effect, the Consumption Indicator could lose some of its market-moving potential this time around as traders may be wary of its predictive power.
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