Euro to Look Past CPI Data as Greece Headlines Dominate the Spotlight

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Talking Points:

• Euro to Look Past May Inflation Data, Focus on Greece-Related News Flow

• Australian Dollar Gains as RBA Disappoints Bets on Dovish Shift in Rhetoric

• See Economic Releases Directly on Your Charts with the DailyFX News App

The preliminary set of May Eurozone CPIfigures headlines the data docket in European trading hours. The headline year-on-year inflation rate is expected to rise to 0.2 percent, the highest in six months. The outcome seems unlikely to meaningfully drive the Euro however considering its limited implications for near-term ECB policy bets.

Rather, the single currency will look to Greece-related news-flow for direction cues. Negotiations have entered the proverbial 11th hour amid worries that Athens may fail to repay over €300 million due to the IMF on Friday, triggering events leading to insolvency and a possible ejection from the Eurozone.

Key figures from the lender side of the impasse – German Chancellor Merkel, IMF Managing Director Lagarde, ECB President Draghi, French President Hollande and EC President Juncker – met to develop a list of conditions for Greece to meet in exchange for funding in a last-ditch attempt to avoid deeper crisis. Markets will keep a close eye on follow-up headlines to gauge how the effort will progress in the days ahead.

The Australian Dollar underperformed in overnight trade, rising over 1 percent on average against its top counterparts, following the RBA monetary policy announcement. While policymakers’ decision to keep the cash rate unchanged at 2 percent was widely expected, a parallel drop in the Aussie and front-end bond yields in recent weeks hinted at pre-positioning for a dovish forward guidance turn. That did not materialize, with Governor Glen Stevens and company keeping to a non-committal, data-dependent posture.

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Asia Session

GMT	CCY	EVENT	ACT	EXP	PREV
22:45	NZD	Terms of Trade Index (QoQ) (1Q)	1.5%	1.7%	-2.3%
23:30	AUD	Australian Weekly Consumer Confidence Index	113.5	-	113.5
23:50	JPY	Monetary Base (YoY) (MAY)	35.6%	-	35.2%
23:50	JPY	Monetary Base End of period (¥) (MAY)	307.4T	-	305.9T
01:30	JPY	Labor Cash Earnings (YoY) (APR)	0.9%	0.3%	0.0%
01:30	JPY	Real Cash Earnings (YoY) (APR)	0.1%	-	-2.7%
01:30	AUD	BoP Current Account Balance (1Q)	-10.7B	-10.8B	-10.2B
01:30	AUD	Net Exports of GDP (1Q)	0.50	0.00	0.70
04:30	AUD	RBA Cash Rate Target (JUN 2)	2.00%	2.00%	2.00%

European Session

GMT	CCY	EVENT	EXP	PREV	IMPACT
07:55	EUR	German Unemployment Change (MAY)	-10K	-8K	Medium
07:55	EUR	German Unemployment Rate (MAY)	6.4%	6.4%	Medium
08:30	GBP	Net Consumer Credit (APR)	1.0B	1.2B	Low
08:30	GBP	Net Lending Sec. on Dwellings (APR)	1.9B	1.8B	Low
08:30	GBP	Mortgage Approvals (APR)	63.5K	61.3K	Medium
08:30	GBP	M4 Money Supply (MoM) (APR)	-	0.3%	Low
08:30	GBP	M4 Money Supply (YoY) (APR)	-	-0.6%	Low
08:30	GBP	M4 Ex IOFCs 3M Annualised (APR)	4.0%	2.5%	Low
08:30	GBP	Markit/CIPS UK Construction PMI (MAY)	55.0	54.2	Medium
09:00	EUR	Eurozone PPI (MoM) (APR)	0.1%	0.2%	Medium
09:00	EUR	Eurozone PPI (YoY) (APR)	-2.0%	-2.3%	Medium
09:00	EUR	Eurozone CPI Estimate (YoY) (MAY)	0.2%	0.0%	High
09:00	EUR	Eurozone CPI Core (YoY) (MAY A)	0.7%	0.6%	High

Critical Levels

CCY	Supp 3	Supp 2	Supp 1	Pivot Point	Res 1	Res 2	Res 3
EURUSD	1.0793	1.0873	1.0900	1.0953	1.0980	1.1033	1.1113
GBPUSD	1.5050	1.5155	1.5178	1.5260	1.5283	1.5365	1.5470

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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