Talking Points:

Euro May Look Past October’s Flash EZ CPI on Limited ECB Implications
NZ Dollar Down as Building Permits Slump Undercuts RBNZ Rate Hike Bets
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October’s preliminary Eurozone CPI reading headlines the economic calendar in European trading hours. Expectations call for a print at 0.4 percent on the benchmark year-on-year inflation rate, marking a slight improvement after the five-year low of 0.3 percent recorded in August and maintained in September. The outcome may not yield a meaningful response from the Euro absent a wild deviation from consensus forecasts considering its limited implications for the near-term trajectory of ECB monetary policy.

Indeed, Mario Draghi and company are still in the implementation phase of a medley of stimulus efforts and will likely want to see how things progress for some time after everything is in place. That means additional easing probably will not materialize at least until next year, putting the central bank on auto-pilot in the interim. We remain short EURUSD.

The US Dollar outperformed in overnight trade in a move that probably reflected follow-on from a strong set of third-quarter US GDP figures released earlier in the day. The upbeat report reinforced a comparatively hawkish FOMC policy announcement earlier in the week, helping to scatter speculation that the Fed will delay raising interest rates until 2016 having concluded its QE3 stimulus program.

The New Zealand Dollar was weakest on the session after a report showed Building Permits unexpectedly tumbled 12.2 percent in September, marking the largest drop in over two years. The result likely reinforced perceptions that a buoyant housing market will pressure the RBNZ to raise rates in the near-term. The Japanese Yen also traded lower as the US GDP figure lifted Asian equities amid hopes for stronger export demand and undermined the appeal of the safety-linked currency.

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