Inflation is cooling off in Europe, but it is heating up in the US

Forex Signals US Session Brief, June 13 – UK Earnings and US CPI Can’t Move the Markets Today

Posted Wednesday, June 13, 2018 by
Skerdian Meta

Today is inflation day in the economic calendar. Earlier this morning we had the Swiss PPI (producer price index) which missed expectations, while the UK PPI number came much higher than expected. Perhaps Britain and Switzerland are using different suppliers for their raw material imports.

The UK CPI inflation, on the other hand, came as expected and it maintained the declining trend which started earlier this year. The US PPI inflation report is due shortly and it is expected to be better than last month. Although, I don’t expect this report to have much effect on the USD today because the FED meeting is coming up later in the evening. The FED has set their mind to hike the interest rates today from 1.75% to 2% and I don’t think the PPI report will change anything.

The European Session

Swiss PPI MoM – The Swiss producer inflation PPI was expected at 0.4% this morning but it came at 0.2%. This is a considerable miss, but producer inflation remains upbeat in Switzerland nonetheless. PPI has followed a positive trend this year and today’s miss doesn’t change that. If PPI grows by 0.2% every month, it would mean that PPI inflation would grow by 2.4% in a year, which is pretty good.

UK CPI YoY – The UK CPI report was published in the morning and it came as expected at 2.4%. The CPI inflation used to be at 3% at the beginning of the year but it started cooling off in March and since then it has been slowing down. Now it stands at 2.4% and the Bank of England doesn’t feel pressured to hike interest rates, hence the bearish move in GBP pairs today.

UK PPI MoM – The PPI output grew by 0.4% this month against 0.3% expected, while the PPI input grew by 2.8%, up from 1.8% expected. That’s quite a jump in the input number, but it remains to be seen if it will translate into higher CPI in the following months.

Eurozone Employment Change QoQ – The employment change used to be stable at a 0.4% growth rate for several months. It ticked lower last month at 0.3% and this month was expected to remain the same, but it ticked higher again at 0.4%. Employment remains on the right track in Europe despite the economic slowdown in the last two quarters.

Eurozone Industrial Production – Speaking of economic slowdown in Europe, the industrial production declined by 0.9% this month. The economic and political uncertainty which is coming from all sides has eroded the investor confidence and the economy is suffering from it.

The US Session

US PPI MoM – The PPI inflation has been growing steady at around 0.3% throughout this year, but last month it slowed down to just 0.1%. This month it is expected to pick up again and grow by 0.3% which would be good, but won’t have much effect on the USD considering that the FED meeting is coming up in the evening.

US Crude Oil Inventories WoW – The US oil inventories are expected to shrink by 1.4 million barrels today after having increased by 2.1 million last week. While the USD doesn’t really care about this data, the Canadian Dollar will likely find some bids if the drawdown is bigger than expected.

US FOMC Meeting – The much anticipated FOMC meeting is coming up this evening. The market is expecting the FED to hike interest rates again after having increased them twice in the last six months. The rate hike is already priced in, so I don’t expect much action on that besides the initial knee-jerk reaction. The action will come from the FOMC statement, the economic projections statement and the press conference that will follow.

 

Trades in Sight

Bearish NZD/USD

  • The price is near resistance
  • The stochastic is overbought on the H1 chart
  • The FED is expected to be hawkish today

NZD/USD is very close to resistance now

We sold NZD/USD a while ago as this pair was climbing higher. Now it seems like the climb might be coming close to an end since the price is close to resistance which comes at around 0.7050. The stochastic indicator is also overbought so the move up should be over soon.

In Conclusion

The US PPI report was just published as I was writing this midday forex brief. It was yet another positive economic report from the US which makes things even better for the FED tonight. So, the rate hike is a done deal, now we will see what the FED has to say about the economy.

 

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About the author

Skerdian Meta is our Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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