It took some time, but the Euro eventually made a very strong rally after the rate hike, breaking above the next levels as well. Also the upcoming week is very busy, with no less than 9 events to rock the common currency, many of them inflation related. Here’s an outlook for the European events, and an updated technical analysis for EUR/USD, now on higher ground. this initially sent the Euro into a “sell the fact” mode after the hike. But together with the US political mess, a huge gain was eventually seen. Will we see some consolidation at these levels, or will the rally continue? Let’s start.
French Industrial Production: Monday, 6:45. Europe’s second largest country starts the busy week of European events. After a surprising strong rise of 1%, and quite a few positive surprises beforehand, a more modest growth rate of 0.5% is expected now.
Axel Weber talks: Monday 15:30. The outgoing president of the German Bundesbank is still an influential member of the ECB, and a known hawk. Speaking in Bochum, Weber is likely to support the rate hike. The big question is if he sees many more hikes soon.
German Final CPI: Tuesday, 6:00. With inflation being the very closely watched by the ECB, every figure is of importance. The initial rise of 0.5% in prices will likely be confirmed now. Note that last month saw an upwards revision in this number.
German ZEW Economic Sentiment: Tuesday, 9:00. This is one of the most important surveys and is very sensitive to any mood changes. German analysts and investors are optimistic in recent months, but this optimism is eroding. Last month, the 350 strong survey unexpectedly dropped from 15.7 to 14.1, A drop to 12.2 points is expected now. Will the same concern be seen again? The less important all-European sentiment is expected to edge down from 31 to 29.8 points.
German WPI: Wednesday, 6:00. The Wholesale Price Index is definitely a second tier indicator, yet as aforementioned, it is of importance these days. In the past 4 months, prices at the wholesale level rose more than expected, showing that inflation has reached this layer as well. The pace is now predicted to ease from 1.4% to 1.3%.
Industrial Production: Wednesday, 9:00. The figure for the Euro-zone is published after the French and German releases. Nevertheless, it always rocks the Euro. A modest growth rate of 0.2% was recorded last month. A significant acceleration is likely now, given the German strength, to 0.8%.
ECB Monthly Bulletin: Thursday, 8:00. After the highly anticipated rate hike, Trichet wasn’t clear about the timing of the next move. The market expects another move in Q3. This monthly report will show us what the members of the ECB saw before making their decision. Concerns about inflation will boost the Euro, while concerns about the peripheral economies will weaken it.
CPI: Friday, 9:00. The main driver of a stronger Euro is headline inflation. According to the flash release, consumer prices rose at an annual pace of 2.6% in March. This will probably confirmed now. The ECB’s target is 2%. Any change will rock the Euro. Core CPI is expected to be revised to the upside, from 1% to 1.1%, still very stable, and not reflecting “second round effects”.
Trade Balance: Friday, 9:00. Germany’s trade surplus didn’t grow as expected, and this will likely be reflected in the trade balance for the whole Euro-zone. The deficit is expected to tick higher, from 3.3 to 3.4 billion euros.