Data Barrage To Drive FX

At 2:00 AM Germany Q2 GDP q/q (exp 0.4%, prev 0.5%)
Germany Q2 GDP y/y (exp 2.7%, prev 3.3%)
At 4:30 AM UK July CPI m/m (exp -0.2%, prev 0.2%)
UK July CPI y/y (exp 2.3%, prev 2.4%)
UK July RPI m/m (exp -0.1%, prev 0.5%)
UK July RPI y/y (exp 4.3%, prev 4.4%)
UK July RPI-x m/m (exp -0.1%, prev 0.4%)
UK July RPI-x y/y (exp 3.2%, prev 3.3%)
At 5:00 AM Eurozone June Industrial Production m/m (exp -0.1%, 0.9%)
Eurozone June Industrial Production y/y (exp 2.3%, prev 2.5%)
Eurozone Q2 GDP q/q (exp 0.6%, prev 0.7%)
Eurozone Q2 GDP y/y (exp 2.7%, prev 3.1%)
At 8:30 AM Canada June Trade Surplus (C$5.6bln, prev C$5.76bln)
US Trade Deficit (exp $61.0 bln, prev $60.04 bln)
US July PPI m/m (exp 0.2%, prev -0.2%)
US July PPI-x m/m (exp 0.2%, prev 0.3%)

The dollar is mixed heading into the Tuesday session, trading higher against the euro and sterling, but losing ground to the yen amid heightened risk aversion. Central banks' injection of liquidity has for the time being calmed market fears of a global credit crunch, helping to stabilize equity and money markets.

US economic data for release today will see July PPI and June trade deficit. The headline PPI figure is estimated to reverse the 0.2% decline from June, rising by 0.2%. The core PPI reading is forecasted to drift slightly to 0.2%, down from 0.3% in the prior month. Meanwhile, the June trade deficit is estimated to edge higher to $61.0 billion, compared with a deficit of $60.04 billion a month prior.

GBP Slips Ahead of Inflation

The sterling trades near its lows against the dollar and yen, mired by yesterday's weaker than expected producer price index numbers, hovering around the 2.01-level and 237, respectively. Sentiment over the Bank of England's scope for further rate hikes dragged the pound lower yesterday and will continue to weigh on traders' minds in the coming session ahead of key reports on UK inflation.

Markets await the July UK CPI report, due out at 4:30 AM, is expected to hover above the BoE's 2% target at 2.3% y/y, albeit down slightly from the previous reading of 2.4%. The monthly CPI reading is seen down by 0.2%, versus a 0.2% increase from June. Also to be released will be the July retail price index, estimated to fall by 0.1%, compared with a 0.5% increase a month earlier and down slightly to 4.3%, versus 4.4% a year earlier.

Euro Hovers near 1.36

The euro holds steady just above the 1.36-handle against the dollar and around 160.50 versus the yen. The single currency has remained under pressure against the majors amid pressure in the carry trades, prompted by increased investor wariness. Traders will turn to economic data in the coming session, including Germany's Q2 GDP, Eurozone industrial production and GDP.

Economic growth in the Eurozone's largest economy is seen easing in Q2, falling to 0.4% from 0.5% in the previous quarter and down to 2.7% versus 3.3% a year prior. Eurozone industrial production is estimated to fall in June, declining by 0.1% compared with a 0.9% increase a month earlier and slip to 2.3% versus 2.5% a year earlier. Lastly, Eurozone GDP for Q2 is estimated to slip marginally to 0.6% from 0.7% in the previous quarter and down to 2.7% versus 3.3% a year earlier.