Euro to Look Past GDP, PMI Data as ECB Meeting Looms Ahead

Talking Points:

• Euro May Look Past GDP, PMI Data as Focus Remains on ECB Meeting
• US Dollar Looking to Extend Advance on Services ISM, Fed Beige Book
• Aussie Dollar Gains on Upbeat GDP, Loonie Sinks Before BOC Meeting

A revised Eurozone GDP report is due to confirm output expanded 0.2 percent in the first quarter. Separately, the final Eurozone Composite PMI print is forecast to match preliminary estimates revealing a slight slowdown in manufacturing- and service-sector activity in May. The releases’ impact on the Euro may be relatively limited as traders mirror the ECB’s solitary focus on price stability. That may see markets looking past business cycle indicators to speculate on an expansion of stimulus efforts at this week’s monetary policy meeting after another dismal CPI print in May.

Later in the day, the spotlight will turn to US data, where May’s ISM Non-Manufacturing Composite reading as well as the Federal Reserve’s Beige Book survey of regional economic conditions headline the docket. US news-flow has increasingly outperformed relative to expectations since early April, hinting analysts are underestimating the recovery’s vigor and opening the door for upside surprises. With that in mind, a firm ISM print coupled with a rosy Fed survey may help scatter lingering doubts about the approaching end of QE asset purchases and subsequent tightening. Such a turn of events is likely to bode well for the US Dollar.

The Australian Dollar narrowly outperformed in overnight trade after an upbeat set of first-quarter GDP figures. The report showed output grew 1.1 percent in the three months through March, topping expectations for a 0.9 percent gain and yielding the largest quarterly expansion in two years. The Canadian Dollar was weakest on the session as traders looked ahead to tomorrow’s Bank of Canada rate decision amid speculation about a dovish rhetorical shift to match the recent round of soft economic data.

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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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