GBP and UK CPI, June 18th
- Current 2.4% Expected 2.6%
- Above expected: GBP Bullish
- Below expected: GBP Bearish
- Key pairs to watch: GBP/USD, EUR/GBP
Inflation reports are key indicators for any economy, as Central Banks kept a close watch on it: the Bank of England has a mandate to keep inflation in check, with a target of 2%, something that never resulted easy. With the economy improving, market expects a higher reading annual basis, of around 2.6%. A steadily growing inflation above the 2% target may in term force the BOE to seek tightening the money supply, either by rising rates, or reducing the assets purchase program. With hawkish Carney taking over the BOE, a reading above expected should boost Pound higher, while a soft print may drag on the local currency as it raises the scope for additional monetary support.
USD and US CPI, June 18th
- Current 1.1%
- Above expected: USD Bullish
- Below expected: USD Bearish
- Key pairs to watch: EUR/USD, USD/JPY,GBP/USD
CPI reading will come handy this month, just one day ahead of FED policy meeting. Lately inflation has been falling, toping this year at 2.0% in March, and pointing for another soft number, something that won’t be cheered by QE tapering fans: a reading below expected will only suggest the economy continues in slow motion, and suggest QE will be here to stay. A sudden increase in inflation won’t have a big impact as it will be just one stand-alone reading, although a huge deviation close or above 2.0%, will likely be understood as positive for the USD, at least in the short term.
USD and FED monetary policy meeting, June 19th
- QE Tapering: USD Bullish
- QE ad eternum: USD Bearish
- Key pairs to watch: EUR/USD, USD/JPY, GBP/USD, AUD/USD
Investors had been diminishing hopes of QE tapering during the past 3 weeks, but that does not mean the FED could not trigger strong market movements. These last few days, rumors point for the FED stating that if somehow they decide to taper QE, a rate hike is still out of sight. On the other hand, the reality shows that unemployment rate is still far away from the required 6.5%, and inflation seems to be decelerating, which means the most likely scenario is that the FED will not announce a change to its program. However, if they state that policy will remain accommodative as they did the last 2 meetings, market interpretation and reaction could fall beyond forecast: dollar has appreciated after both meetings, as investors chose to go on QE tapering. A more conservative stance, with no end at sight is what it takes to see greenback resuming its bearish move.
Source: http://dld.bz/cE6yX
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