We look for a slight increase in today's German ZEW index for June to 34.8 from 33.1. The index has been trending lower for some months but the more positive global newsflow is expected to lead to more positive expectations for Germany.
UK CPI is expected to decline slightly from 1.8% in May to 1.7% in June. Inflation has trended lower since the peak in 2011 and is not putting pressure on the Bank of England. But given the rapid decline in unemployment and recent hawkish comments from BoE governor Carney, the market will be sensitive to any upside surprises.
Later today the US will also release inflation for June. We expect it to rise to 1.9% from 1.8% in May. Core inflation has bottomed and has come increasingly into focus as the downward risk to inflation that the Fed has mentioned is fading fast. The question is whether the Fed will acknowledge this already in Wednesday's FOMC statement.
US also releases housing permits and starts. The data are quite volatile and rose strongly in April. Hence we look for a small decline in May (weaker than consensus). However, the trend seems to be turning higher as also indicated by a decent rise in the US NAHB housing survey yesterday.
On top of the above data, developments in Iraq and Ukraine will be on the radar screen today.
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