Euro, British Pound May Fall on Soft Eurozone Inflation Data

Talking Points:

Euro, Pound May Fall if Soft Eurozone CPI Fuels ECB Easing Speculation
Yen Falls, Australian and Canadian Dollars Rise as Risk Appetite Recovers
Gauge Trends and Spot Reversals in Leading Currencies with DailyFX SSI

Eurozone CPI figures headline the economic calendar in European trade. The core year-on-year inflation rate expected to tick up to 1 percent. Yesterday’s disappointing set of analogous German price growth numbers warns a soft result may be in the cards however. Such an outcome may fuel bets on further expansion of ECB stimulus measures, weighing on the Euro. It may likewise punish the British Pound considering further ECB easing stands to compound imported disinflation pressure in the UK, delaying the onset of BOE rate hikes.

The Australian and Canadian Dollars outperformed in overnight trade in a move that appeared corrective in the context of yesterday’s broad-based selloff across the risky asset spectrum. Appropriately enough, the safety-linked Japanese Yen proved weakest on the session. S&P 500 futures are pointing firmly higher, suggesting the corrective recovery is aiming to carry forward in the hours ahead. With that in mind, we continue to see the path of least resistance as favoring risk aversion in the first part of 2016.

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