Summary:

  • UK inflation data may offer some support for pound

  • DOE is expected to show a draw giving Brent a chance to once again test $80.50 handle

  • In the evening USD will be in the spotlight as FOMC minutes will be released

The Super Wednesday is finally here. In contrary to Monday and Tuesday today’s calendar is flooded with top-tier macroeconomic data. The marathon will begin with PMI indices from eurozone that will be followed by the inflation readings from the UK shortly after. In the afternoon investors will be served with the PMI gauges from the US and weekly DOE report on the oil inventories. Last but not least, in the evening minutes from the latest FOMC meeting are scheduled for release. Traders should stay cautious throughout the day as volatility surely will be there.

9:00 am BST – Eurozone, PMIs for May. After a great 2017 for European economy no one seemed to be bothered by the early-2018 deterioration of PMIs. Markets assumed its just a healthy correction given the indices were at very elevated levels. However, as the year passed successive readings have painted a picture of weakening eurozone. As the latest readings saw a minor uptick one can assume that this correction is over but in case today’s report shows further slide concerns may arise. The manufacturing gauge is expected to drop from 56.2 pts to 56.1 pts while the services one should remain at 54.7 pts. One should keep in mind that today’s data is preliminary.

9:30 am BST – UK, CPI Inflation for April. GBP bears observed the latest data from the UK economy as well as comments from BoE central bankers with delight. The UK currency weakened significantly in Q2 2018. Inflation seems to be the only reason for BoE to be hawkish as the latest reading saw price growth dynamics at 2.5% YoY, well above the 2% target. Today’s report may provide some ground for the pound as the headline measure should remain at 2.5% while the core one is expected to slide from 2.3% YoY to 2.2% YoY.

2:45 pm BST – US, PMIs for May. When we take a look at the PMI readings from the world’s biggest economy on can easily see that it was doing great in past years. Both services and manufacturing gauges have shown a constant signs of expansion. Today’s readings are expected to be no different. However, the upside potential may be slowly running out as momentum is weakening. The services reading is expected to show a uptick from 54.6 pts to 55 pts while the manufacturing index should remain at previous level of 56.5 pts. One should keep in mind that today’s data is preliminary.

3:30 pm BST – US, Crude Oil Inventories. Yesterday’s API report on oil inventories saw a drop as expected yet it was smaller than market consensus assumed. In turn we saw Brent price pull back from the vicinity of $80.50 handle after it failed to overcome this obstacle for the second time in the past five days. DOE report due today should show a 2.07M drop providing more fuel to maintain current rally. However, one should remember that the last week’s reports were in contrary to each other.

7:00 pm BST – US, FOMC Minutes. The monetary tightening in the US has started long time ago and no one questions it. What investors try to figure out is the pace of this process. Fed informed markets that it will rise rates three times this year but the economic conditions suggest that four hikes may be needed. Today’s report may give insight into moods among central bankers and their attitude towards faster pace of tightening. The meeting was held before the latest inflation data was released therefore it will not be recognized in it.

Central bank speakers scheduled for today:

  • 9:00 am BST – RBA’s Lowe
  • 7:15 pm BST – Fed’s Kashkari

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GBPUSD broke below the 50% Fibo level and continues its short-term downtrend. Will GBP find support in inflation data? Source: xStation5