Thursday, July 17, 2008
Friday’s economic calendar will be very light, and while the release of German producer prices could be market-moving for European assets, the impact may be very short-lived since the news will focus on one specific economy, rather than the entire Euro-zone. Producer prices in the Euro-zone’s largest economy are expected to rise 0.7 percent during the month of June, pushing the annual rate of growth up a more than 26-year high of 6.5 percent
Friday’s economic calendar will be very light, and while the release of German producer prices could be market-moving for European assets, the impact may be very short-lived since the news will focus on one specific economy, rather than the entire Euro-zone. Producer prices in the Euro-zone’s largest economy are expected to rise 0.7 percent during the month of June, pushing the annual rate of growth up a more than 26-year high of 6.5 percent. Indeed, raw material prices have skyrocketed in the commodity boom, especially when it comes to the cost of oil. In fact, surging energy prices have been the primary driver of gains in the German producer price index during recent months, and given the rise in crude above $140/bbl during June, this reading is unlikely to be any different. If the index actually shows a stronger-than-expected rise, the traders will be quick to recall European Central Bank President Jean-Claude Trichet’s hawkish bias, especially as he said just last week that inflation had hit “worrying” levels. On the other hand, Mr. Trichet also said that following the 25 basis point rate hike enacted earlier this month, “the monetary policy stance will contribute to achieving price stability over the medium term.” As a result, a softer-than-anticipated producer price reading will add to expectations that the ECB is done raising rates.for more informations....
Since forming a double-bottom at 109.65 in June, Bunds have rallied quite a bit. However, the contract has simply consolidated around 112 over the past week or two, as traders weigh the odds of further tightening of monetary policy by the ECB. As a result, the release of German producer prices are likely to weigh Bunds below near-term support at 111.50 as the index is likely to add to the ECB’s inflation concerns. On the other hand, weaker-than-expected reading could keep Bunds within range to rise toward 112.read more...
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