Talking Points:

NZ Dollar Soars on Business Confidence Print, Yen Gains as Stocks Drop
Euro May Decline if Regional CPI Release Follows Germany’s Example
US Dollar May Find Strength in Home Sales, Consumer Confidence Data

The New Zealand Dollar surged after a firm set of Business Confidence figures from ANZ. The sentiment index soared to the highest level since March 1994. The Kiwi’s surge higher tracked a jump in front-end New Zealand bond yields, suggesting traders interpreted the chipper outcome to suggest the RBNZ will move ahead with plans to begin raising interest rates. Priced-in expectations put the probability of a 25bps increase in the benchmark lending rate at the March 12 policy meeting at 96 percent, according to data from Credit Suisse. The Japanese Yen likewise advanced as the Nikkei 225 stock index declined, boosting demand for the safe-haven currency.

February’s preliminary Eurozone CPI figure headlines the economic calendar in European trading hours. Expectations call for a slight downtick that takes the headline year-on-year inflation rate to 0.7 percent, matching the 47-month low recorded in October. We presented the possibility of a downside surprise in our discussion of Germany’s analogous report yesterday and saw that speculation validated. A similarly soft print on the region-wide figure threatens to apply downward pressure on the Euro as investors ponder the likelihood that deepening disinflation will prompt the ECB to expand monetary stimulus efforts, perhaps as soon as next week when Mario Draghi and company hold sit down for their monthly policy meeting.

Later in the day, the spotlight turns to January’s USPending Home Sales data and the final revision of February’s University of Michigan Consumer Confidence gauge. An upbeat surprise on the New Home Sales print sent the US Dollar sharply higher earlier in the week and a similar outcome seems likely if the former release follows suit. The latter figure’s preliminary release showed confidence held steady in February, which notably diverged from the Conference Board’s equivalent measure that pointed to deterioration. A revision lower may thus have less of an impact in that will offer something already somewhat suspected, but an upside surprise or even an in-line result may generate a boost for the greenback.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

21:45

NZD

Building Permits (MoM) (JAN)

-8.3%

-3.5%

7.1%

23:15

JPY

Nomura/JMMA Manufacturing PMI (FEB)

55.5

–

56.6

23:30

JPY

National CPI (YoY) (JAN)

1.4%

1.3%

1.6%

23:30

JPY

National CPI Ex-Fresh Food (YoY) (JAN)

1.3%

23:30

JPY

National CPI Ex Food, Energy (YoY) (JAN)

0.7%