EUR

The latest European ZEW index was released yesterday with disappointing news for the euro. The index measures analyst optimism for expected economic developments over the next six months.

For the third month in a row it came in below expectations, with a reading of 42.7 down from a 61.2, and way off the expected 72. All a clear sign that investors aren’t currently feeling too optimistic about Europe.

With further Covid waves still raging in parts of the continent and the European Central Bank unlikely to alter monetary policy any time soon, euro optimism is hard to find, both short and long term. This has seen the currency approach six month lows vs the dollar and even bigger lows vs the pound. 
 

GBP

The euro’s losses are the pound’s gain and GBP/EUR was flirting with near eighteen month highs yesterday. 

Investors seem to have taken last week’s Bank of England meeting as largely positive and now await tomorrow’s UK GDP data. If it comes in on or better than forecast, it will be a further boost to the pound. Analysts predict GDP will rise by 5% quarter-on-quarter. 

USD

Today see’s the release of US consumer price index (CPI) figures. Expectations are inflation will still be way above the 2% target but forecasts are set to show lower readings month-on-month and year-on-year.

This would fall in line with the Federal Reserve’s stance that previous ultra high readings were transitory and should subside over the year. With an improving job market, investors will be hoping the Fed starts tapering if the CPI data doesn’t disappoint. 

Key announcements 

12:30 -USD – Core CPI MoM (0.4 from previous 0.9) 

12:30 – USD – Core CPI YoY (4.3 from previous 4.5)