Today sees the release of key economic release form 3 of the globes powerhouse financial countries.
First up, we have the release of the UK CPI y/y, expected at 2.7%. The figure will offer us a glimpse into just how much inflation the UK economy is experiencing. Inflation is measured as a change in the price of a basket of goods and services, and rising inflation implies a heating up of the economy which if it gets too hot will require an increase in interest rates while falling inflation implies the opposite. If today’s figure beats expectation, we will see the GBP strengthen while a lower than expected figure will see the GBP weaken.
We then move to the Euro Zone, where its larges member, Germany, is set to release the ZEW Economic Sentiment figure, expected at 21, higher than last month’s 20.6. The figure is set to show that institutional investors and analyst are more optimistic about the outlook of the German economy. Given that Germany is the EU`s largest member, important news out of Germany impacts the EUR. A better than expected release will see the EUR strengthen while a worse than expected release will see the EUR weaken.
We then cross the pond towards the USA. The USD has found its footing after relinquishing some ground to light profit taking ahead of tomorrow`s major news event, were the FED is expected to increase interest rates to 1.25%. An increase in rates usually result in the strengthening of the respective currency while a cut in rates is linked to a depreciation of the respective currency. However, until the release we are still expecting some data out of the US in the form of the PPI m/m and should the data beat expectations, the USD will move higher while if the data misses we could see a slight selloff of the USD.