Euro Bounce on PMIs Unlikely to Last, US Dollar at Risk on CPI Drop

Talking Points:

Euro Gains on Pickup in PMI Readings Unlikely to Yield Follow-Through
US Dollar Vulnerable if Soft CPI Print Undercuts Fed Rate Hike Outlook
Yen Drops Alongside Japanese Yields, Aussie Down on Weak China PMI

The preliminary set of November’s Eurozone PMI figures headlines the economic calendar in European trading hours. The region-wide composite gauge is forecast to show manufacturing- and service-sector activity growth narrowly accelerated for a second consecutive month. An upbeat result may offer a short-lived boost to the Euro but follow-through seems unlikely considering the inability of such outcomes to meaningfully alter the ECB’s decidedly dovish posture.

Later in the day, the spotlight turns to October’s US CPI report. The benchmark year-on-year inflation rate is seen edging lower to 1.6 percent, the lowest in seven months. Investors may interpret a weak result as suggesting that the Fed will be relatively slow to issue its first post-QE interest rate hike, punishing the US Dollar.

The Japanese Yen underperformed in overnight trade, sliding as much as 0.6 percent on average against its leading counterparts. The move tracked a drop in Japan’s benchmark 10-year bond yield, hinting the selloff reflected bets on increasingly accommodative monetary policy after GDP figures released earlier in the week showed the world’s third-largest economy has sunk back into recession.

The Australian Dollar likewise faced selling pressure after the HSBC Chinese Manufacturing PMI gauge proved disappointing, showing factory-sector activity unexpectedly stalled in November. The East Asian giant is Australia’s top export market, meaning a slowdown there translates into an ebbing outlook for cross-border sales that bears down on overall economic growth and RBA monetary policy projections.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

21:00

NZD

ANZ Job Advertisements (MoM) (OCT)

-0.3%

–

2.3%

21:45

NZD

PPI – Inputs (QoQ) (3Q)

-1.5%

–

-1.0%

21:45

NZD

PPI – Outputs (QoQ) (3Q)

-1.1%

–

-0.5%

23:50

JPY

Merch Trade Balance Total (¥) (OCT)

-710.0B

-1027.0B

-960.6B

23:50

JPY

Adj Merch Trade Balance (¥) (OCT)

-977.5B

-1100.0B

-1067.7B

23:50

JPY

Merch Trade Exports (YoY) (OCT)

9.6%

4.5%

6.9%

23:50

JPY

Merch Trade Imports (YoY) (OCT)

2.7%

3.4%

6.2%

0:30

AUD

RBA FX Transactions – Market (A$) (OCT)

389M

–

910M

0:30

AUD

RBA FX Transactions – Gov’t (A$) (OCT)

-487M

–

-1017M

0:30

AUD

RBA FX Transactions – Other (A$) (OCT)

114M

–

115M

1:35

JPY

Markit/JMMA Mfg PMI (NOV P)

52.1

52.7

52.4

1:45

CNY

HSBC Mfg PMI (NOV P)

50.0

50.2

50.4

5:00

JPY

Supermarket Sales (YoY) (OCT)

-1.9%

–

-1.0%

6:00

JPY

Machine Tool Orders (YoY) (OCT F)

30.8%

–

31.2%

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

7:00

CHF

Trade Balance (SFr) (OCT)

2.57B

2.49B

Medium

7:00

CHF

Exports (MoM) (OCT)

–

-3.3%

Low

7:00

CHF

Imports (MoM) (OCT)

–

-7.4%

Low

7:00

JPY

Convenience Store Sales (YoY) (OCT)

–

-1.3%

Low

7:00

EUR

German Producer Prices (MoM) (OCT)

-0.2%

0.0%

Low

7:00

EUR

German Producer Prices (YoY) (OCT)

-1.0%

-1.0%

Low

8:00

EUR

Markit France Mfg PMI (NOV P)

48.8

48.5

Medium

8:00

EUR

Markit France Services PMI (NOV P)

48.5

48.3

Medium

8:00

EUR

Markit France Composite PMI (NOV P)

48.7

48.2

Medium

8:30

EUR

Markit/BME Germany Composite PMI (NOV P)

54.0

53.9

High

8:30

EUR

Markit Germany Services PMI (NOV P)

54.5

54.4

High

8:30

EUR

Markit/BME Germany Mfg PMI (NOV P)

51.5

51.4

High

9:00

EUR

Markit Eurozone Services PMI (NOV P)

52.4

52.3

High

9:00

EUR

Markit Eurozone Composite PMI (NOV P)

52.3

52.1

High

9:00

EUR

Markit Eurozone Mfg PMI (NOV P)

50.8

50.6

High

9:30

GBP

Retail Sales Incl. Auto (MoM) (OCT)

0.3%

-0.3%

Medium

9:30

GBP

Retail Sales Incl. Auto (YoY) (OCT)

3.8%

2.7%

Medium

9:30

GBP

Retail Sales Ex Auto (MoM) (OCT)

0.3%

-0.3%

Medium

9:30

GBP

Retail Sales Ex Auto(YoY) (OCT)

4.2%

3.1%

Medium

11:00

GBP

CBI Trends Total Orders (NOV)

-5

-6

Low

11:00

GBP

CBI Trends Selling Prices (NOV)

-5

-3

Low

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EURUSD

1.2382

1.2469

1.2511

1.2556

1.2598

1.2643

1.2730

GBPUSD

1.5402

1.5533

1.5608

1.5664

1.5739

1.5795

1.5926

— Written by Ilya Spivak, Currency Strategist for DailyFX.com

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