All Eyes And Ears On ECB Minutes
We are not expecting too many fireworks from the ECB minutes later today, with the governing council set to reinforce the view that rate normalisation will not begin until after the summer of 2019. Since the last meeting, we have had a series of source stories from ECB officials citing some members unhappy about the timing, looking for an earlier move it would seem. There is nothing to say that the consensus view can change between now and then, though forward guidance is driving this market and the timing has been set.
Consequently, and to the benefit of Euro exporters, the EUR remains undervalued and pressured. This allows for better price competitiveness and we may start to see this coming through the figure in the coming months. Earlier this morning we saw EU wide industrial production in May rising a little more than expected, pulling the year on year rate up from 1.7% to 2.4%. Early signs perhaps. Until then, the strong USD narrative continues to play out and there looks to be little relief for any currency pair until some of the US data starts to show signs of softening. It has not so far.
There are other factors leading to potential EUR under-performance, notably the political divisions among member nations. Immigration has been a bone of contention with Italy's new government forcing the issue into the public arena. We have a tentative agreement in place, though underlying discontent is still being reported via the news-wires.
EUR/USD is currently hovering above the next band of support seen at 1.1650-60, and a move below here may well see us testing the mid 1.1500's. 1.1500 has been a very strong congestion area in recent weeks, so we will be keeping a close eye on this area, if indeed it is tested in the aftermath of the minutes and/or the US CPI data release which is an hour later.