The Euro may correct higher after hitting a nine-month low against the US Dollar if July’s inflation data tops economists’ expectations.
Talking Points:
Euro May Bounce from 9-Month Low if Flash CPI Data Beats Forecasts
New Zealand Dollar Bounces as Markets Chew Over RBNZ Policy Outlook
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The preliminary estimate of July’s Eurozone CPI reading headlines the economic calendar in European hours. Expectations call for the benchmark year-on-year inflation rate to register at 0.5 percent, unchanged from the prior month. Leading PMI data from Markit Economics suggested output prices fell at a faster pace this month compared with June, opening the door for a downside surprise. Such an outcome may feed ECB stimulus expansion bets, weighing on the Euro.
It ought to be noted however that price-growth figures out of the single currency area have steadily improved relative to economists’ forecasts since the beginning of the year, according to figures from Citigroup. That means analysts have tended to over-estimate the extent of Eurozone disinflation. If that proves to be the case this time around, an upbeat print may help the single currency correct higher after sliding to the lowest level in nearly nine months against the US Dollar.
The New Zealand Dollar narrowly outperformed in overnight trade, rising as much as 0.2 percent on average against its leading counterparts. The move paced a rebound in the island nation’s benchmark 10-year bond yield, hinting the Kiwi’s bounce reflected a correction as markets re-price monetary policy expectations following last week’s RBNZ rate decision.
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