Economic calendar: Will inflation support common currency?

Summary:

• France and Italy to publish inflation reports in the morning

• Euro area price growth expected to remain intact

• UoM consumer sentiment forecasted to tick higher after initial reading slumped

The final day of the week does not bring many crucial macroeconomic readings but one especially interesting, EMU inflation. Readings from member countries released yesterday can be named a bit negative. Apart from that, Belgium, Portugal and Italy will publish their second quarter GDP reports today. Keep in mind that GDP report for the whole euro area will be publish next week on Friday. Last but not least, University of Michigan will release revised consumer sentiment data in the afternoon.

10:00 am BST - Eurozone, Inflation and unemployment rate. The inflation readings from EMU countries released yesterday did not provide investors with a positive surprise. Price growth in Spain remained intact while the German reading saw deceleration. Given that Germany is the biggest EMU economy this does not bode well for the whole bloc’s reading. Economists surveyed by bloomberg expect headline CPI inflation to remain at 2.1% YoY in August while the core gauge is expected to reinforce at 1.1% YoY. However, it is worth to note that France (7:45 am BST) and Italy (9:00 am BST) will release their prints earlier therefore investors may want to follow these publications in order to try to determine what the reading for the whole euro area might be. Apart from that, unemployment rate is expected to decline from 8.3% to 8.2%.

3:00 pm BST - US, University of Michigan consumer sentiment. The initial UoM consumer sentiment reading for August disappointed by showing a significant drop from 97.9 pts to 95.3 pts. While the current conditions subindex declined significantly the expectations gauge remained vastly unchanged. What one may find interesting is that UoM and CB readings diverged in August as the latter one showed a significant advance in consumer confidence. Today’s revision of the UoM print is expected to show a minor uptick for both subindices as well as the headline reading.

Central bank speakers scheduled for today:

• 6:30 pm BST - ECB’s de Guindos

EURUSD still trades below the resistance zone that served as the upper bound of the recent consolidation zone. The pair pulled back yesterday but were unable to break below the 33-period moving average (green line on the chart above). The EMU inflation reading release may spur additional volatility on the pair today. Source: xStation5