Tonight Germany is expecting to release rather weak inflation figure this month; the figures are expecting go into the negatives.
This result will be listed as an ‘All Day’ event because the ‘Actual’ is comprised of data from 6 German states which report their CPI throughout the day. There are Also two versions of inflation released about 15 days apart – Preliminary and Final. The Preliminary release is the Euro zone’s earliest major consumer inflation.
Last month the German inflation figure fell on 0% growth month on month. Tonight investors are expecting -0.1%; this should put downward pressure on the EUR/AUD pairing. This is because consumer prices account for a large majority of the overall inflation figures. The inflation within a country is important to currency valuation because rising prices lead the Central Bank to raise Interest Rates out of respect for their inflation containment directive.
Continuing this inflation theme, on Tuesday Evening the Euro-zone is expecting the release of their CPI flash estimate. This will give a good indication to the inflation rate expected as a year on year figure. The figure has been on the decline since April of this year and is only expected to be released this month at 0.3%; this is dangerously low for an economy. Again, this should put pressure on the Euro.
We have a very quiet week on the domestic front. The only AUD data releases that are expected this week is Retail Sales figures due out Wednesday, followed by building approvals and Trade Balance on Thursday. The Retail Sales figure is expected to be at the same figure as the previous month at 0.4% Month on Month. The trade balance figure is looking to be slightly better at -0.78 billion from last month’s figure of -1.36 billion. Building approvals are looking to be revised down, as the previous months release came in at 2.5% and this month they are expecting 1.1%.
If these domestic figures come in as expected this should give some support to the AUD. However, commodity prices have been affecting the AUD much more than any data releases as of late, which continue to remain at lower than expected levels.