PMIs, CANADIAN CPI HEADLINE ACTIVE FRIDAY SESSION

Friday’s trading session makes up for a relatively downbeat week in the market. On the docket are, a deluge of PMI reports from Europe and the United States, as well as high-profile inflation data from Canada – the world’s eleventh-largest economy.

Action begins at 06:45 GMT with French first quarter gross domestic product (GDP). The French economy is projected to grow 0.4% in the quarter and 1% annually.

Over the next two hours, IHS Markit will release a spate of PMI data covering Germany, France, and the broader euro area. The purchasing managers’ index (PMI) is a monthly report that captures business activity in the manufacturing and services industries. The PMI scale ranges from 1-100, where 50 separates expansion from contraction.

Economists expect robust expansion throughout the region’s manufacturing and service economies. The Eurozone Composite Index, which tracks the performance of manufacturing and services combined, is expected to come in at 56.8 in June. That’s only 0.2 percentage point below the previous month’s reading.

The euro could be prone to volatility in and around the headline PMI reports. The common currency has established a narrow trading range in recent sessions, with the EUR/USD hovering in the mid-1.11 region.

The North American session features headline US manufacturing and services PMI beginning at 13:45 GMT. Just 15 minutes later, the Commerce Department will report on new home sales for the month of May.

However, the most prominent North American data release takes place at 12:30 GMT when the Canadian government unveils its latest inflation report. The consumer price index (CPI) is forecast to soften to 1.5% annually in May. A stronger than expected result will only embolden expectations that the Bank of Canada (BOC) is on course to raise interest rates. Those expectations could trigger large gains in the Canadian dollar.

The performance of the US dollar also has implications on commodities, which are priced in greenbacks. Gold prices traded firmly higher on Thursday, a sign that bullion was stabilizing after a multi-week correction.  

EUR/USD

The EUR/USD has traded in a narrow range this week, as market participants awaited new market catalysts. Those catalysts could come by way of PMI data on Friday. Immediate resistance is located at the 1.12 handle.  

USD/CAD

The Canadian dollar has rebounded sharply in recent weeks, sending the USD/CAD back down toward the 1.30 handle. The USD/CAD lost about 100 pips on Thursday after Canadian retail sales data surprised to the upside. Momentum is clearly on the side of the loonie.

GOLD

After an unspectacular two weeks, gold prices have regained $1,250.00. Bullion had been mired in a downward correction ever since the commodity failed to overtake $1,300 – a level that continues to offer stiff resistance.