The US Dollar may rise if signs of rising employment costs boost Federal Reserve interest rate speculation while the Euro is likely to look past July CPI data.
Talking Points:
US Dollar May Rise as Employment Cost Data Boosts Fed Rate Hike Outlook
July’s Flash Eurozone CPI Unlikely to Inspire Lasting Euro Follow-Through
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The preliminary set of July’s Eurozone CPI figures headlines the economic calendar in European trading hours. The benchmark year-on-year inflation rate is expected print at 0.2 percent, unchanged from the prior month.
The release seemsunlikely to inspire meaningful follow-through from the Euro considering their limited implications for near-term ECB monetary policy. Indeed, the central bank appears effectively on auto-pilot as it continues to implement its €60 billion/month QE effort through September 2016.
US economic data will enter the spotlight in the day. The second-quarter Employment Cost Index report is in focus, where expectations point to a slight deceleration for a print at 0.6 percent compared with 0.7 percent in the three months through March.
US news-flow has increasingly outperformed relative to consensus forecasts recently, opening the door for an upside surprise. Such a result – particularly if it is bolstered by an upside revision on July’s University of Michigan Consumer Confidence gauge – stands to reinforce bets on an on-coming Fed interest rate hike following this week’s hawkish shift in FOMC rhetoric, boosting the US Dollar.
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