The Euro looks to the outcome of an Italian bill sale to gauge sovereign risk jitters. The Pound looks primed for a correction ahead of Industrial Production figures.

Talking Points

Euro to Look Past German CPI, Focus on Italian Bill Auction Results
Pound May See Outsized Gains if Industrial Production Tops Forecasts
NZ Dollar Pullback Amplified by House Sales Data, FinMin Comments

The economic calendar is relatively quiet in European trading hours. The final revision of February’s German CPI figures is expected to confirm the year-on-year inflation rate at 1.5 percent, the lowest since December 2010. While soft price growth gives the ECB room to introduce stimulus to offset the Eurozone recession, the central bank seems unlikely to act while political instability in Italy undermines policy transmission. With that in mind, the data’s impact on the Euro is likely to be limited. An auction of 12-month Italian bills may prove of greater interest. A jump in average yields or a significant drop in the bid-to-cover ratio, a measure of demand, will point to growing sovereign risk jitters and stand to weigh on the single currency.

Separately, UK Industrial Production is seen posting a nominal 0.1 percent monthly increase over the same period. A print in line with forecasts would fall in line with recent trend averages, offering little guidance to investors’ BOE policy expectations and thereby passing with little impact on the British Pound. Priced-in stimulus bets have been swelling over the past five weeks however, and Sterling has duly declined. Speculative positioning is at its most net-short in four months (according to data from the CFTC), hinting prices may be vulnerable to a correction. Against this backdrop, an upside surprise may produce an outsized push higher by the UK unit.

The New Zealand Dollar underperformed in overnight trade, down as much as 0.4 percent against its top counterparts. The move appeared corrective following the Kiwi’s standout advance over the preceding 24 hours. Ominous commentary from New Zealand Finance Minister Bill English and soft economic data appeared to compound selling pressure. English said the drought plaguing the country may curb economic growth and make it harder to reach the government’s budget surplus target. Meanwhile, House Sales grew at the slowest pace since April 2011 according to data from REINZ.

Asia Session:

GMT

CCY

EVENT

ACT

EXP