INFLATION DATA HITS THE HEADLINES ON FRIDAY
The latest readings on consumer inflation for the Eurozone and Canada will headline the financial markets on Friday.
Action begins at 08:00 GMT with a report on the Eurozone currency account balance. Data from the European Commission’s statistical agency is expected to show a surplus of €23.2 billion in June compared with €22.4 billion the previous month.
At 09:00 GMT, Eurostat will release the final batch of July consumer inflation data for the 19-member Eurozone. The consumer price index (CPI) is forecast to have declined 0.3% in July. That translates into a year-over-year gain of 2.1%, which is still in line with the European Central Bank’s target. So-called core inflation, which strips away volatile goods such as food and energy, is forecast to fall 0.5% month-on-month. In annualized terms, CPI is likely to come in at 1.1%.
Shifting gears to North America, Statistics Canada will release its monthly CPI report at 12:30 GMT. Canadian inflation likely edged up 0.1% in July. That would bring annual CPI to 2.5%. Canada’s core inflation rate is forecast to dip 0.1% on month and rise 1.3% annually.
The University of Michigan will release the monthly consumer sentiment index at 14:00 GMT. The preliminary gauge is forecast to read 98.0 in August compared with 97.9 the previous month.
Energy traders will also be keeping tabs on weekly crude inventory data courtesy of Baker Hughes Inc. The report will be released at 17:00 GMT.
The US dollar continues to assert its dominance over the global foreign exchange market, with rising inflation and protectionist policies keeping the greenback elevated. The US dollar index (DXY), which tracks the performance of the greenback against a basket of six peers, set a fresh 13-month high this week as the euro, pound and Aussie plunged to new lows.
Europe’s common currency has recovered somewhat from its recent yearly low, though the general trend remains overwhelmingly bearish. The EUR/USD exchange rate bottomed at 1.1308 this week but has since recovered to around 1.1390. An assertive dollar is expected to keep the euro bulls in check in the short term.
The North American pair took a breather on Thursday following a sharp rebound the previous session. The USD/CAD exchange rate is now trading in the mid-1.3100 region, with the bulls eyeing a re-test of the 1.3200 handle. To get there, they must first overcome the 15 August swing high of around 1.3170.
The Japanese yen has been surprisingly resilient in the face of a global dollar onslaught. The USD/JPY is headed for a weekly drop, likely in response to growing risk aversion in the stock market earlier in the week. USD/JPY currently sits at 110.88 and is likely to continue its rangebound theme.