EUR Focus: National CPIs and Soft Eurozone Data Weigh on ECB's Hawkishness

EUR: Looking at June national CPIs today

Hawkish rhetoric from European Central Bank President Christine Lagarde this week has failed to move the needle much on market pricing of 25bp hikes in July and September. Let's see whether those expectations change much on the release today of national CPI data in both Germany and Spain. These are a precursor to tomorrow's release of the eurozone CPI figure, where the core rate is expected to tick up to 5.5% year-on-year from 5.3%. 

The difference between the US and the eurozone story, however, is the confidence and activity data. Today, the eurozone is expected to release another soft set of consumer and industrial confidence data for June. This leaves a lingering sense that the ECB's hawkishness could crumble before the Fed's. 

With USD/CNY staying bid and eurozone data soft we would say EUR/USD risks another drop to the 1.0850 area. Valuation metrics suggest EUR/USD does not have to sell off too far - but the pieces of the investment puzzle have yet to fall into place for a EUR/USD rally.