Euro to Look Past German Jobs Data, Focus on EU Leaders Summit

DailyFX

The Euro is likely to look past June’s German Unemployment report to focus on the outcome of an EU leaders’ summit starting today in Brussels.

Talking Points

  • Euro to Look Past German Jobs Data, Focus on EU Leaders’ Summit
  • UK GDP Revision Unlikely to Detail BOE Outlook, Spur Pound Volatility

German Unemployment data is expected to show the economy shed 8,000 jobs in June. Such an outcome would fall closely in line with the 12-month trend average (6.9K) and so seems unlikely to meaningfully dislodge the established ECB policy outlook. That suggests the Euro is unlikely to see fireworks as the report comes across the wires (barring a major deviation from consensus forecasts) considering prices continue to track closely with the front-end yield spread.

Meanwhile, EU Leaders are beginning a two-day summit in Brussels. Finance ministers from all 27 countries of the regional bloc reached an agreement on new rules for dealing with failing banks mere hours before their bosses are due to begin their own sit-down. The approach sets the Cyprus-inspired “bail-in” model as the EU-wide standard.

A troubled lender’s creditors and shareholders will be first in line to take losses, followed by uninsured depositors (all those above €100k). These forced losses will be capped at 8 percent of a bank’s liabilities, with the relevant national government stepping in thereafter if necessary. The EFSF/ESM bailout facility will also be able to use up to €60 billion for bank recapitalization.

On balance, this means the EU leadership has been left with little more to do besides a rubber-stamp approval on arguably the thorniest economic issue on the summit docket. The other prominent matter to be attended to is the effort to boost economic growth and reduce unemployment in a context of budget consolidation. Traders will look for anything concrete on this front, with a sizable commitment likely to chip away at the need for further ECB accommodation and thereby support the single currency.

The final revision of first-quarter UK GDP figures is also on tap, with economists penciling in confirmation of the 0.3 quarter-on-quarter increase reported in original estimates. With consensus forecasts firmly pointing to no change in policy at next week’s BOE meeting, only a major revision downward seems likely to meaningfully unhinge the British Pound.

Capitalize on Shifts in Market Mood with the DailyFX Speculative Sentiment Index

Asia Session:

GMT

CCY

EVENT

ACT

EXP

PREV

22:45

NZD

Trade Balance (NZ$) (MAY)

71M

427M

174M

22:45

NZD

Exports (NZ$) (MAY)

4.08B

4.45B

3.95B

22:45

NZD

Imports (NZ$) (MAY)

4.01B

4.02B

3.77B

22:45

NZD

Trade Balance – 12 Mth YTD (NZ$) (MAY)

-869M

-522M

-685M

1:00

NZD

NBNZ Business Confidence (JUN)

50.1

-

41.8

1:00

NZD

ANZ Activity Outlook (JUN)

45.0

-

34.3

1:30

CNY

Industrial Profits YTD (YoY) (MAY)

11.4%

-

11.4%

1:30

AUD

Job vacancies (MAY)

-7.3%

-

-10.1%

4:30

JPY

All Industry Activity Index (MoM) (APR)

0.4%

0.4%

0.2%

Euro Session:

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

6:00

EUR

German Import Price Index (MoM) (MAY)

-0.4% (A)

-1.4%

Low

6:00

EUR

German Import Price Index (YoY) (MAY)

-2.9% (A)

-3.2%

Low

7:00

EUR

EU Leaders Hold Summit in Brussels

-

-

High

7:55

EUR

German Unemployment Change (JUN)

8K

21K

High

7:55

EUR

German Unemployment Rate s.a. (JUN)

6.9%

6.9%

High

8:00

EUR

Euro-Zone M3 s.a. (YoY) (MAY)

2.9%

3.2%

Low

8:00

EUR

Euro-Zone M3 s.a. (3M) (MAY)

2.8%

3.0%

Low

8:30

GBP

Current Account (£) (1Q)

-12.0B

-14.0B

Low

8:30

GBP

Gross Domestic Product (QoQ) (1Q F)

0.3%

0.3%

Medium

8:30

GBP

Gross Domestic Product (YoY) (1Q F)

0.6%

0.6%

Medium

8:30

GBP

Total Business Investment (QoQ) (1Q F)

-

-0.4%

Low

8:30

GBP

Total Business Investment (YoY) (1Q F)

-

0.7%

Low

8:30

GBP

Lloyds Business Barometer (JUN)

-

39

Low

9:00

EUR

Euro-Zone Business Climate Indicator (JUN)

-0.65

-0.76

Low

9:00

EUR

Euro-Zone Industrial Confidence (JUN)

-12.3

-13

Low

9:00

EUR

Euro-Zone Services Confidence (JUN)

-8.5

-9.3

Low

9:00

EUR

Euro-Zone Economic Confidence (JUN)

90.4

89.4

Low

9:00

EUR

Euro-Zone Consumer Confidence (JUN F)

-18.8

-18.8

Medium

Critical Levels:

CCY

SUPPORT

RESISTANCE

EURUSD

1.2969

1.3130

GBPUSD

1.5261

1.5403

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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