Nordea FX Strategy Research notes that this week’s PCE-price data (Thu) is one chance for the market to reassess the Fed outlook.
In that regard, Nordea thinks that this week’s PCE deflator print is unlikely to be a hawkish game-changer this month, but still believes that the recent downtrend in US inflation is of a transitory nature, as June is the peak month for the negative FX impulse for import prices.
“Also judged by other indicators, June could be the trough in inflation..The ECB is still looking for an upward trend in core inflation. The super-core inflation measure, which is constructed to correlate with the amount of economic slack in the economy, is yet to show a trend,” Nordea adds.
“Given recent flows and positioning trends, the EUR looks more vulnerable to weak data short term than the USD,” Nordea argues.
Source: Nordea Research
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