The Euro is unlikely to find a meaningful catalyst in February’s CPI print while the Aussie may follow the Dollar higher on supportive US economic data.

Talking Points

Euro Unlikely to Find Volatility in CPI Data, EU Summit Outcome
US Dollar, Aussie May Rise on Another Supportive Set of US Data
New Zealand Dollar Sold as Consumer Confidence Gauge Slumps

February’s Eurozone CPI report headlines a quiet European economic calendar. Expectations call for the headline year-on-year inflation rate to print at 1.8 percent, the lowest in 29 months. While soft price growth gives the ECB room to introduce stimulus to offset the Eurozone recession, the central bank seems unlikely to act while political instability in Italy undermines policy transmission. With that in mind, the data’s impact on the Euro is likely to be limited. The EU Leaders’ Summit enters its second day, but the sit-down is unlikely to yield demonstrable progress on the most significant issue facing the region – the political gridlock in Italy. Indeed, we discussed yesterday, there seems relatively little that can be done at the EU level (at least publically) until an increasingly likely repeat election is played out.

Later in the day, the spotlight turns to a busy set of US economic releases. Another relatively supportive outing is expected. February’s year-on-year CPI growth is expected to accelerate to 1.9 percent, marking the highest inflation reading in four months. Meanwhile, Industrial Production is seen rebounding over the same period after a drop in January and March’s preliminary University of Michigan Consumer Confidence gauge is penciled in at the highest since November.

Furthermore, US economic data has increasingly outperformed relative to expectations since early February, opening the door for rosier outcomes. Markets have treated supportive US data in terms of reducing the scope for Fed stimulus over recent weeks, meaning similar outcomes this time around are likely to be supportive for the US Dollar. With that said, the Australian Dollar may likewise advance as signs of resilience in the world’s top economy boost risk appetite and investors are enticed by the currency’s improving yield profile against a backdrop of fading rate cut bets.

Most major currencies are trading little-changed in late Asian hours. The New Zealand Dollar is narrowly underperforming, weighed down by a disappointing set of Consumer Confidence figures from ANZ. The bank reported that its sentiment gauge dropped 5.1 percent, producing the largest decline in nine months. The result reinforced dovish overtones in the RBNZ policy statement from earlier in the week, compounding pressure on interest rate expectations. Data from Credit Suisse now suggests investors are pricing in no change in the headline lending rate over the next 12 months having called for at least one 25bps increase as recently as a week ago. The Aussie likewise backed up as prices corrected following yesterday’s aggressive rally in the wake of blowout employment figures.

Asia Session:

GMT

CCY

EVENT

ACT

EXP

21:30

NZD

Business NZ PMI (FEB)

56.3

–

55.2

0:00

NZD

ANZ Consumer Confidence Index (MAR)

114.8

–

121

0:00

NZD

ANZ Consumer Confidence (MoM) (MAR)

-5.1%

–

2.3%

Euro Session:

GMT

CCY

EVENT

EXP

IMPACT