EUR CPI and USA PPI Volatility is Set for the Week – What Can We Expect?

Coming from a very slow week last week, entering now a new week ahead full of meaningful events, we will need to watch closely the EUR area as well as the USA area as these two will be the most affected ones from the G10 group so let’s give a break on those data now and get to know what will happen during the week ahead.

MondayRight on Monday, we won’t have much volatility from any side of the market, with the agenda kind of slow only featuring the Inflation expectations for New Zealand and a FOMC Member giving us a speech about the monetary policy from the USA. I would like to add something that not many people get, but those hints from the members of FOMC are kind of important as they give us some Easter eggs if I can say that about the forward guidance of the Monetary Policy, so pay attention to those types of news. 

 Source: Finlogix Economic Calendar TuesdayGoing to Tuesday, things start to get a little bit more interesting on the side of the EUR area as Germany will release the MoM CPI expected to be no changes from the past release (last month) to Tuesday's release. That means if the inflation comes in as expected then not much will happen on the EUR side of the market. If it comes higher, we can expect a bit of volatility from EUR. My honest opinion on that is that there is a low but still having a probability of coming higher than expected as we see that the population still spending money over the EUR area and the CPI still sticky for the whole EUR area. Pay attention to that because this will shape the market during the week. Still on Tuesday but a bit later after the German CPI, we will have a very important measure of inflation that the market has been waiting for, and this is the PPI that stands for Price Producer index. Take it as the same as the CPI but instead of being for the end consumer, it shows how much inflation the producer side is having. If this data comes higher, it will bring volatility for the USD as bullish, the expectation still higher than the previous about 0.1% higher, with the previous being 0.2% and now expecting 0.3%, remembering that this is a MoM data and brings a huge influence on the market.

 Source: Finlogix Economic CalendarWednesdayRight after we have the PPI, we will have the CPI from the US on Wednesday. Note that this is exactly the opposite of the PPI so using a very simple logic, this means that if the PPI comes higher than the CPI tends to come higher for that month as well, but why? Well, imagine that you’re a businessperson and have a big industry that manufactures a ton of pens per month. You won't pay for the inflation on those pens alone when you know you can just forward the cost of the inflation on the goods you’re selling to the final consumer. That means if the PPI comes higher than the CPI tends to follow. The expectations for CPI are at a decrease of 0.1% from 0.4% last month to now 0.3%. If it comes lower, then I can see the EURUSD most probably going up from the levels where it is now. Can’t forget that at the same time as the CPI, we will have the Retail sales which indicate how the population is spending. If the population keeps spending (meaning that the number on the Retail Sale will come higher) then there is a high probability of the inflation will come higher as well in the coming months. Why? The simple answer is that if the Central bank, in this case, the FED, still doesn’t want to reduce rates because of spending still being too high, then more spending will generate more inflation, meaning higher rates for longer. 

 Source: Finlogix Economic CalendarThursdayComing to Thursday, we will have more FOMC speakers so I can’t stress enough how silly this can be but always try to watch those speeches from the FOMC that they will give you some decent hints on the monetary policy of USA and what the members are thinking about to do in the coming months and years of FOMC meetings. In Asia, we will have Japan GDP where it is expected to decline a lot coming to negative territory so that will be very interesting to watch on the JPY, QoQ expected to come on -0.4% from a 0.1% last Quarter, Japanese Yen is not strong and something like that coming to his end won’t be taken as good and will weaken further.

FridayComing to the end of the week on Friday, we will have a very important data release as well for the EUR side (Euro Area as a whole) coming the CPI YoY and MoM most expected to come a bit below the previous so that means a bit of weakening for the EUR area. The playbook of the week for EURUSD would be if the data from US comes lower than this will take DXY (USDIndex) down and eventually will get the EURUSD up especially if the EUR area comes higher. 

 Source: Finlogix Economic CalendarI hope everyone has a good week ahead and is ready for another good week on the markets, just a friendly reminder that all the data release times of the images are on Australia time so make sure to access the Finlogix Economic Calendar (https://www.finlogix.com/calendar)and change for your time zone.

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