* Weak German survey would be likely to push euro lower
* BoE chief to be quizzed by lawmakers on rates
* Japan to announce more 'Third Arrow' policies
(Adds details, quotes)
By Anirban Nag
LONDON, June 24 The euro and the pound traded
steady on Tuesday before testimony from Bank of England chief
Mark Carney and a German sentiment survey that could highlight
the monetary policy divergence between the euro zone and
Investors also looked ahead to an economic policy update
from Japan later in the day.
In Europe, the German Ifo survey at 0800 GMT is likely to
provide signs of how companies in the euro zone's largest
economy are responding to recent easing measures by the European
Its business climate index is forecast to show a reading of
110.2 in June, down from 110.4 in May while the expectations
index is forecast to dip to 105.9 from 106.2.
On Monday, German PMI data fell short of expectations,
suggesting the economy could be losing momentum. Further
evidence of that would be likely to keep pressure on the ECB to
ease policy even further in the coming months.
"There is a downside risk to the Ifo expectations survey but
we will need a reading of 104 and below to see the euro drop
sharply," said Jeremy Stretch, head of currency strategy at CIBC
The euro was flat on the day at $1.3605, having
traded on either side of $1.3600 in the past few sessions.
Against the yen, the common currency stood at 138.75,
while the dollar fetched 102 yen.
ABE AND CARNEY
Japanese Prime Minister Shinzo Abe will detail his so-called
"Third Arrow" policies including phased corporate tax cuts and
changes to the $1.26 trillion Government Pension Investment Fund
(GPIF), the world's biggest pension fund.
Given that many of the reforms have already been leaked or
announced by officials, the risk is that they could receive a
lukewarm response from investors. But the market will be keen to
see how they are fleshed out and implemented.
"Much of the attention, particularly from foreign investors,
is on GPIF reform," said Shinichiro Kadota, chief Japan FX
strategist at Barclays Bank in Tokyo.
"But judging from what the GPIF has been implying so far,
portfolio allocation details are not expected to be revealed
until August or even October, so any market reaction today is
likely to be limited."
Abe's government is pushing the GPIF to buy more stocks and
invest less in government bonds, which is expected to have
repercussions on financial markets given the fund's size.
Meanwhile, Bank of England Governor Mark Carney's appearance
at a parliamentary committee at 0830 GMT could be a potential
driver of sterling.
Of particular interest for traders is whether Carney will
provide more hints of an early rate hike, after he suggested as
much earlier in the month and set sterling on course for a near
six-year peak versus the dollar.
The pound traded at $1.7025 after reaching $1.7064,
its highest since October 2008. Traders said if investors get
the impression from Carney that a rate hike is unlikely before
the year end, the currency would be sold off.
"If that happens, we could see a pullback in sterling but
any rise in euro/sterling should be sold into," added CIBC's
(additional reporting by Ian Chua; Editing by John Stonestreet)