We look for a slight increase in today’s German ZEW index for June to 34.8from 33.1. The index has been trending lower for some months but the more positiveglobal newsflow is expected to lead to more positive expectations for Germany.
UK CPI is expected to decline slightly from 1.8% in May to 1.7% in June.Inflation has trended lower since the peak in 2011 and is not putting pressure on theBank of England. But given the rapid decline in unemployment and recent hawkishcomments from BoE governor Carney, the market will be sensitive to any upsidesurprises.
Later today the US will also release inflation for June. We expect it to rise to 1.9%from 1.8% in May. Core inflation has bottomed and has come increasingly into focusas the downward risk to inflation that the Fed has mentioned is fading fast. Thequestion is whether the Fed will acknowledge this already in Wednesday’s FOMCstatement.
US also releases housing permits and starts. The data are quite volatile and rosestrongly in April. Hence we look for a small decline in May (weaker than consensus).However, the trend seem to be turning higher as also indicated by a decent rise in theUS NAHB housing survey yesterday.
On top of the above data, developments in Iraq and Ukraine will be on the radarscreen today.
Read the full report: FX Daily