Summary:

• Tuesday begins a critical period for the pound this week
• Swedish CPIF important to watch in the morning
• Crude oil stocks by API scheduled in the evening

Tuesday is slated to bring some volatility across the FX space given two significant inflation releases coming from Europe. Besides, there will be a speech delivered by ECB’s vice chairman Vitor Constancio as well as a report on a change in oil stocks according to the API.

8:30 am BST – Swedish inflation: The Riksbank made an important decision last week changing officially its inflation gauge from CPI to CPIF. As a result, from the August’s data onwards CPIF should be a much more crucial measure to watch for investors. CPIF is expected to come in at 2.3% yoy while CPI at 2.2% yoy. Let us remind that the SEK has performed pretty well against the greenback as of late, hence in order to retain its bullish momentum another solid inflation numbers are decisively needed which would prompt the Swedish central bank to forecast a first rate hike possibly earlier than Q2 2019.

9:30 am BST – British inflation: The conventional wisdom suggests the higher inflation the stronger currency could be as it strengthens the case for a rate hike. Nonetheless, there is not so easy in case of the UK. In short, it’s all about real wages which have depressed recently putting the whole economy at risk. Keep in mind that negative real wage growth is likely to translate into lower consumer spending, the largest part of the UK’s economy. Thus, today’s reading in conjunction with the labor market data tomorrow could be exceptionally important for the GBP. If real wage growth gets out of a negative territory, it could be seen by markets that the bottom could have been already accomplished.

2:45 pm BST – ECB’s Constancio speech: The ECB left all its interests rates unchanged last week leaving investors uncertain in terms of the future of the QE program though. As for now, October is the month when some announcements on the QE are expected to be made, so any hints related to that topic could turn out to be worth keeping a close eye.

9:40 pm BST – Crude oil stocks by API: The latest reading was distorted by the impact coming from the hurricane Harvey. There is guesswork that today’s reading could be affected once again, though possibly to the lower extent. As usual, the API report is a prognosis ahead of the DoE report being published a day later.

As per our previous analysis, the EURGBP has lowered towards its notable support area at 0.9050. The better pack of the data from the UK today and tomorrow could encourage traders to break that level. Source: xStation5