Euro zone PPI data may show continued inflationary pressures in the euro zone as the market shifts its attention from the Greek sovereign debt crisis to the upcoming ECB policy meeting.
Today’s Economic Data Releases:
EUR – PPI m/m – 09:00 GMT
Expectations: 0.8%. Previous: 0.7%.
A higher than expected increase in euro zone producer prices will underscore the market’s shift from focusing on the Greek debt crisis to policy differentials via Europe and the US. This is highlighted by the spread between 2-year German bunds and the 2-year US Treasury which has done a fairly good job of tracking the price movement of the EUR/USD. This morning the spread ballooned to 127.4 in favor of the bund. During Wednesday’s ECB press conference I expect Trichet will use the words, “strong vigilance” to signal a future ECB interest rate hike, a catalyst for the euro.
CAD – Ivey PMI – 14:00 GMT
Expectations: 59.1. Previous: 57.7.
Last week saw disappointing PMI numbers from the US, UK, EUR, with the lone exception coming from Switzerland. Lower than expected Ivey PMI numbers would likely weaken the Canadian dollar further as the USD/CAD continues to come off of its late April low. Initial resistance is found at Friday’s high of 0.9850 and the pair could have the scope to reach as high as the 200-day moving average which comes in today at 0.9950. The last time the USD/CAD traded at this level was in late November of 2010. Support is found at the 100-day moving average near 0.9750, followed by the rising trend line off of the May low which comes in today at 0.9690.
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