A number of key fundamentals are set for release on Tuesday. What’s on the calendar, and how might it affect the markets?
US Core CPI (MoM)
The day’s headline figure is the US core CPI release. Core CPI details the change in the price of a basket of goods and services in the US, excluding food and energy. The reason the data excludes food and energy is that the price of both can be volatile, and as such, can distort the data. Traders will be watching this release closely to gain insight into the future of US monetary policy. There is something of a tug of war going on between the doves and the hawks in the US at the moment – with the hawks calling for the tightening of monetary policy on the back of better than expected consumption and sales data and the doves calling for prolonged loose policy until the employment scenario improves. Today’s inflation data will go a long way towards supporting either side of the coin, so look for a better than expected result (>0.1%) to strengthen the USD versus its major counterparts, and conversely, a downside miss (<0.1%) to weaken the USD.
Chinese GDP (YoY)
The second big figure comes later this evening, as China reveals its latest GDP data. There have been mounting fears of a Chinese economic slowdown, and a spate of recent data misses looks to support this suggestion. Consensus already forecasts a slowdown on the previous period last year, and a downside miss would undoubtedly compound expectations. A worse than expected release (<7.3%) would likely weaken those currencies tightly correlated to the Chinese economy such as the Australian dollar and its New Zealand counterpart. Conversely, a better than expected release (>7.3%) would go some way towards alleviating investor concerns surrounding the Chinese economy and its impact on global markets, and would likely strengthen the Aussie and the Kiwi.
To contact the reporter of this story; Samuel Rae at Samuel@forexminute.com