European FX Outlook: Neither German data nor UK GDP is likely to dethrone King Dollar

What you need to know before markets open

• The European summit agreed on migration after the late-night meeting.
• St. Louis Federal Reserve Governor James Bullard thinks that Federal Reserve is in a good shape to slow or halt rate hikes. 
• Federal Reserve’s research says that the predictability of recessions by the near-term spread would appear to be a case of "reverse causality." That means the near-term spread may only predict recessions because it impounds expectations that market participants have already formed.
• Pouring some oil into the fire, the US President Trump vows that the US will finish “trade war” it did not start yet.
• Set of German and the Eurozone inflation data together with the final reading for UK Q1 GDP headline the European session. For details of UK GDP read my Preview here.
• The US core PCE inflation gauge and Canada’s GDP highlight in North American session. 

Friday’s market moving events

• Tokyo CPI excluding fresh food increased 0.7% y/y in June, slightly more than expected.
• German import prices are expected to rise 2.7% y/y in May.
• German retail sales are seen falling by -0.5% m/m in May while increasing 1.8% y/y.
• German unemployment is set to remain flat at 5.2% in June.
• The final estimate of UK Q1 GDP is expected to rise 0.1% Q/Q and 1.2% y/y. For details read my Preview here.
• The Eurozone inflation is expected to rise 2.0% in June while core inflation is seen decelerating to 1.0% y/y. 
• Core Personal Consumption Expenditures price index is expected to accelerate by 2.2% in May.
• Canada’s monthly GDP is expected to remain unchanged in April. For details read more in Yohay’s Preview here. 
• Chicago PMI is set to decelerate to 60.0 in June.
• Michigan consumer confidence is seen remaining little changed at 99.2 in June.

Major market movers

• The set of German economic indicators are unlikely to revert current Euro’s slide lower as trade jitters rule the market sentiment that is in favor of the US Dollar. 
• The UK GDP is set to rise 1.2% y/y in first-quarter with numbers unlikely to alter the mood of the Bank of England policymakers that are already strengthening in the camp of hawks. Read how to trade UK GDP report with GBP/USD here.
• Canada’s monthly GDP is expected to remain unchanged in April, but surprises are set to move the market. Read more details of how to trade Canada’s GDP report with USD/CAD here.

Thursday’s macro summary

• German Gfk consumer confidence remained unchanged at 10.7 in July.
• The Economic Sentiment Indicator remained virtually unchanged in the Eurozone for the third consecutive month, registering a marginal decrease of 0.2 points to 112.3 in July.
• The ECB said the Eurozone economic expansion remains solid, broad-based and is expected to continue.
• The ECB said the Eurozone short-term indicators point to continuing strength in the labor market in the second quarter of 2018.
• The ECB said the Eurozone underlying inflation is expected to pick up towards the end of the year, then to increase gradually.
• The Bank of Japan Deputy Governor Wakatabe said that benefits of yield-curve control outweigh side effects with no need to adjust monetary policy now.
• The Bank of England Deputy Governor Sam Woods said many crypto assets appear vulnerable to fraud and manipulation, and money laundering and terrorist financing risks. Woods tells banks, insurers, and funds to have appropriate risk management systems if they invest in crypto assets.
• German preliminary harmonized inflation decelerated to 2.1% y/y in June in line with expectation as energy items rose 6.4% y/y and food 3.4% y/y.
• The US Q1 GDP was revised down to 2.0% Q/Q annualized rate in the final estimate compared to 2.2% estimated previously.
• The US initial jobless claims increased 227K in the week ending June 15.
• Core Personal Consumption Expenditures (PCE) rose 2.3% y/y in Q1 2018 in line with expectations.
• The Bank of England chief economist and a fresh monetary policy hawk Andy Haldane justified his decision by the argument of the UK consumer data has virtually without exception bounced back since May Monetary Policy Committee meeting. Haldane said he does not expect a faster pace of interest rate rises than envisaged at the time of May Inflation Report.
• St. Louis Federal Reserve Governor James Bullard said: “the best bet” is that the US will remain in low inflation, low growth regime for a least a couple more years. Bullard repeated his view that he regards yield term inversion a “key near-term risk” for the Fed. Bullard said Federal Reserve is in a good shape to slow or halt rate hikes.