Forex: Euro Looks to PMI, GDP Data to Set Stage for ECB Meeting

Talking Points:

Euro May Fall if Soft PMI, GDP Data Stoke ECB Easing Speculation
Australian Dollar Falls as 3Q GDP Disappoints, Kiwi Dollar Follows

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All eyes are on the Euro as a round of critical economic releases sets the stage for the ECB monetary policy announcement later in the week. First, the final revision of November’s Eurozone Composite PMI is expected to confirm manufacturing- and service-sector growth slowed for a second consecutive month, yielding the weakest performance since August. Next, a second look at third-quarter Eurozone GDP is forecast to maintain that output grew 0.1 percent, a slowdown compared with the 0.3 percent increase recorded in the three months through June. Soft outcomes are likely to stoke speculation about further easing after last month’s unexpected ECB rate cut, weighing on the single currency.

The Australian Dollar underperformed in overnight trade, falling as much as 1 percent on average against its leading counterparts, following a disappointing set of third-quarter GDP figures. Output grew 0.6 percent from the prior quarter, falling short of forecasts calling for a 0.7 percent increase. The year-on-year growth rate slowed to 2.3 percent, undershooting economists’ bets on a 2.6% result. The outcome weighed against the outlook for RBA monetary policy, fueling speculation about the resumption of interest rate cuts. The New Zealand Dollar followed its Australian namesake lower as a slowdown in the island nation’s top trading partner threatened local export demand, which may reduce scope for RBNZ tightening next year.

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