Today sees key data being release form the USA, Euro Zone and the UK. With markets relatively deadlocked, todays releases will likely result in ample volatility and several trading opportunities.
From the UK, we have the release of inflation data in the form of the CPI y/y, which is a measure of the change in the prices of goods and services purchased by consumers, and accounts for the majority of overall inflation in the UK. Rising inflation beyond a specific level will result in the Bank of England (BOE) having to increase rates and as such a better than expected release, will see markets price in that possibility by buying the GBP. On the other hand, a fall in inflation beyond a certain level will prompt the BOE to cut rates in an attempt to stimulate the economy and as such a worse than expected release will see markets price in the slow down by selling the GBP.
Form the EU we have the release of the German ZEW Economic Sentiment figure, which represents the findings of the surveying of German Institutional investors and analysts, and is regarded as a leading indicator of economic health in the German economy and the EU at large given that the German economy is the largest in the EU. A better than expected release will see the EUR appreciate as markets price in better sentiment and a likely improvement in the German economy and the EU by default. However, a worse than expected release will imply that conditions in Germany are expected to worsen which will see the EUR sold off in anticipation of the worsening economic climate in the EU as a whole. The USA sees the Chairman of the Federal Reserve Bank (Fed), Janis Yellen, taking the podium as she testifies on the Semiannual Monetary Policy Report. Due to her position as the head of the Fed, markets usually scrutinize her speeches and statements in an attempt to decipher clues as to the future of monetary policy in the USA. Should she strike a hawkish tone, in which she sites improved economic conditions warranted of a rate hikes, we will see the USD bounce back and reach for blue skies as traders buy the USD. However, should she back track on her recent bullishness and strike a dovish tone, in which she points out areas of concern, which will hamper rate increase this year, we would see the USD sold aggressively as traders’ positon themselves for a more subdued economic recovery from the US.