Daily Forex Fundamentals | Written by DailyFX | Jun 28 08 00:09 GMT |
What Are The Markets Facing?
On Monday, Eurostat estimates for Euro-zone CPI are expected to show that inflation accelerated at an ever faster clip of 3.9 percent in June. If CPI is indeed confirmed at this pace, the figure would match the 16-year high. While much of the rise in price pressures for Europe, and for that matter, much of the other world's economies, are due to rocketing energy and food costs, the news would only underpin European Central Bank President Jean-Claude Trichet's already hawkish bias. Indeed, Mr. Trichet, whose primary mandate is to maintain price stability, said after the most recent policy meeting that they would consider hiking rates the following month, and that some policy makers had actually wanted to tighten monetary policy in June. As a result, the ECB is widely expected to hike rates by 25 basis points to 4.25 percent at their next meeting on Thursday. However, a weaker-than-expected reading could lead speculation of an imminent hike cool, as the news would give Mr. Trichet leeway to put off increasing rates until later in the summer.
Bonds - 10-Year German Bund Futures
Bund futures have recovered quite a bit from the June 2007 low of 109.66, as market-wide risk aversion leads government debt higher. Looking ahead to next week, Euro-zone CPI estimates for June are expected to show yet another sharp rise, which could weigh Bunds back below 111.00 as the markets anticipate a rate hike by the European Central Bank on Thursday. However, if traders continue to flee risky assets in favor of save havens like government bonds, Bunds could continue to climb to target trendline resistance at 112.00.
FX - EUR/USD
From a long-term perspective, EUR/USD continues to trade within a wide range of 1.5350 - 1.5800, as the US dollar consolidates across the majors. However, the pair remains very much within an uptrend, as EUR/USD bounced from trendline and 100 SMA support just a few weeks ago. Looking ahead to Monday, Euro-zone CPI is expected to rise 3.9 percent in June from a year earlier, which could help EUR/USD break above resistance at 1.5800. Indeed, this data is especially important ahead of the European Central Bank's rate decision on Thursday, when ECB President Jean-Claude Trichet is anticipated to hike rates to 4.25 percent. However, lower than expected CPI figures would shift the market's focus to the Euro-zone's clear economic slowdown and may lessen speculation of an imminent rate increase, which would lead the pair to tumble toward the 1.5630 support level.
Equities - Xetra DAX Index
Germany's Xetra DAX index experienced a slow day on Friday as uncertainty clouded the markets and inflation worries persist, as crude oil rocketed to a fresh record above $142/bbl on Friday. In addition, participants await a much anticipated rate hike by the European Central Bank, which could sap confidence in the economy as many view monetary policy as already being restrictive. Looking ahead, Monday's Euro-zone CPI release could add additional volatility in the markets, as initial estimates are expected to show that the index increased 3.9 percent from a year earlier. If figures are released in line with or more than expected, the index could pull back toward the January lows of 6,384. However, a softer-than-anticipated release could help the index consolidate above 6,400.
Disclaimer
Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.
Posts
No comments:
Post a Comment