Most weekdays offer the release of a flurry of economic data that can influence price action in the financial markets. Due to the surplus of information available, it can be difficult to parse and locate which indicators are most helpful in terms of fundamental and sentiment analysis. Here, we consider key economic news today, which I will be keeping in mind for identifying fundamental catalysts, preparing for future volatility, and devising trade setups.

Euro Area: Monetary Policy Statement & ECB Press Conference

This morning the European Central Bank (ECB) made plain their monetary policy intentions: they will be ending their quantitative easing program with the start of July and implementing an interest rate hike of 25 basis points that month as well, with another identical hike scheduled for September. This caused a great deal of volatility for EUR this morning, with buying pressure spiking before quickly being overtaken by bearish momentum. This is likely because, despite a change in tune from the ever-dovish ECB, the markets had already anticipated these plans, and the ECB’s key rate will remain in the negative even after July’s hike.

United States: Unemployment Claims & Natural Gas Storage

The past week saw 229,000 American workers file for unemployment claims, while only 205,000 claims had been forecast. An additional 97 billion cubic feet of natural gas was held in US storage this past week as well. Both data suggest a slowing US economy with more unemployment and less consumer spending, which is bearish news for USD. However, this information is merely the prelude for tomorrow’s CPI and Core CPI data month-over-month, expected from the Bureau of Labor Statistics at 8:30 a.m. Eastern Time. With economic health teetering in response to the Federal Reserve’s pivot towards hawkishness, tomorrow’s inflation data may be a significant fork in the road for USD. The DXY is currently surging today, clearing and then hovering around the 103 level intraday.

Canada: BOC Financial System Review

This morning the Bank of Canada (BOC) released their annual Financial System Review, in which they analyze Canada’s economic wellbeing and any significant threats they are wary of. They revealed particular concern about the effect of rate hikes on the global economy, as well as its effect on those in Canada contending with high household debt and a hot housing market. While they covered a broad variety of topics including cybersecurity and climate strategy, I personally interpreted the report as being rather dovish, though they did express less concern about the effect of rate hikes on Canada’s non-financial businesses. This may have prompted some of the CAD bearish momentum we saw this morning.

China: CPI (year-over-year)

Due tonight from the National Bureau of Statistics of China at 9:30 p.m. Eastern Time, China’s CPI is expected to hit 2.2% year-over-year, though CPI data from the past two months have surpassed forecasts. Considering yesterday’s report on China’s monthly trade balance exceeded forecasts by over $20 billion, it seems plausible that tonight’s CPI data will likewise reflect a booming economy. Though CNY functions somewhat differently than other currencies due to more centralized control of its value and limited access for traders and investors, it is helpful to monitor China’s economy as its performance has global implications regarding trade imbalances and industrial competition.

Key Takeaways

• With the European Central Bank announcing the planned end of QE and a 25 bp rate hike in July, market expectations were met, and EUR has endured a lot of selling pressure.
• Disappointing increases in US unemployment claims & natural gas storage, hinting at a slowing US economy, did not phase USD today as the DXY surged ahead of tomorrow’s CPI data reports.
• The Bank of Canada’s annual Financial System Review appeared indicative of dovish inclinations, which seemingly factored into CAD’s drop in value today.
• China’s CPI data is due tonight, and in light of yesterday’s news regarding China’s massive trade surplus and past CPI surprises, it could easily surpass the forecasted 2.2%.