Pound Eyes GDP Revision, Euro Looks to Italian Bond Sale

The British Pound looks to revised UK GDP figures to guide the outlook for BOE policy. The Euro eyes the outcome of an Italian bond sale to gauge debt crisis jitters.

Talking Points

British Pound Looks to 4Q GDP Revision to Guide BOE Expectations
Euro Eyes Italian Bond Auction Outcome to Gauge Debt Crisis Worries

Revised fourth-quarter UK GDP figures headline the economic calendar in European hours. Expectations point to confirmation of the earlier estimate that showed output shrank 0.3 percent in the three months through December 2012 compared with the prior quarter. A revision downward stands boost Bank of England stimulus expectations and punish the British Pound, whereas an adjustment higher may offer a lift to the UK unit. We have opted to add to our short GBPUSD position.

Meanwhile, Italy will auction off €7 billion in 5- and 10-year bonds. Traders will look to average yield levels and the bid-to-cover ratio, a measure of demand, to gauge the degree of sovereign risk fears lingering in the market following the questionable Cyprus bailout deal that emerged at the start of the week. A pickup in borrowing costs and/or disappointing uptake stands to weigh on the Euro, and vice versa.

The Japanese Yen underperformed in otherwise quiet overnight trade as stocks advanced in Asia, sapping demand for the regional haven currency. Downward pressure may have been compounded by Bank of Japan Governor Haruhiko Kuroda. The Wall Street Journal reported that the newly-minted central chief was prepared to take steps previously thought too dramatic in an attempt to beat deflation, including a move to buy longer-dated government bonds and removing a self-imposed imposed on the amount of JGBs it purchases.

Asia Session:

GMT

CCY

EVENT

ACT

EXP

0:00

NZD

NBNZ Business Confidence (MAR)

34.6

–

39.4

0:00

NZD

ANZ Activity Outlook (MAR)

32.4

–

37.6

Euro Session:

GMT

CCY

EVENT

EXP

IMPACT