Talking Points:
Euro Unlikely to Find Potent Catalyst in Weak German Inflation Figures
Swiss Franc Pressured, NZ Dollar and Yen in Corrective Mode Overnight
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January’s preliminary set of German CPI figures headlines the economic calendar in European trading hours. The benchmark year-on-year inflation rate is expected to slip into negative territory for the first time since September 2009, when price growth was crafting a bottom in the aftermath of the Great Recession. While the outcome will serve to support the case for aggressive monetary stimulus, its impact on the Euro may prove limited. Mario Draghi and company have just unveiled a sizable QE program and have surely moved to wait-and-see mode, at least for now. That means another soft CPI print will mean relatively little for forward-looking policy bets, offering little impetus for FX volatility.
The Swiss Franc underperformed in overnight trade, sliding as much as 0.8 percent on average against its leading counterparts. A singular, clearly-defined catalyst for the move was not readily apparent. The SNB is due to report on it’s the allocation of its FX reserves tomorrow, which may help investors gauge how officials might go about dealing with CHF495 billion in holdings accumulated as part of maintaining the now-defunct EURCHF floor. Elsewhere, a worrisome Business Times article warned of on-coming capital flight from Swiss banks that opt to pass on SNB-imposed negative rates to clients.
The New Zealand Dollar corrected higher having slumped following a dovish RBNZ monetary policy announcement. The central bank backed off hawkish rhetoric presented in December, saying it expected to keep borrowing costs on hold “for some time” and conspicuously noted that future adjustments can take rates “either up or down”, seemingly opening the door for easing. Indeed, the markets’ priced-in 12 month RBNZ outlook now stands at its most dovish in over three years, with traders leaning toward at least one 25bps reduction. The Japanese Yen retraced downward having bested all of its G10 FX counterparts in the prior session.
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Asia Session
GMT
CCY
EVENT
ACT
EXP
PREV
20:00
NZD
RBNZ Rate Decision
3.50%
3.50%
3.50%
21:45
NZD
Trade Balance (NZ$) (DEC)
-159M
75M
-285M
21:45
NZD
Trade Balance YTD (NZ$) (DEC)
-159M
-830M
-453M
21:45
NZD
Exports (NZ$) (DEC)
4.42B
4.21B
4.04B
21:45
NZD
Imports (NZ$) (DEC)
4.58B
4.13B
4.24B
23:00
AUD
Conference Board Leading Index (NOV)
0.1%
–
-0.2%
23:50
JPY
Retail Trade (YoY) (DEC)
0.2%
0.9%
0.5%
23:50
JPY
Retail Trade (MoM) (DEC)
-0.3%
0.3%
-0.2%
23:50
JPY
Large Retailers’ Sales (DEC)
0.1%
0.5%
1.1%
23:50
JPY
Loans & Discounts Corp (YoY) (DEC)
3.06%
–
2.88%
0:30
AUD
Import Price Index (QoQ) (4Q)
0.9%
1.4%
-0.8%
0:30
AUD
Export Price Index (QoQ) (4Q)
0.0%
-1.0%
-3.9%
European Session
GMT
CCY
EVENT
EXP/ACT
PREV
IMPACT
7:00
GBP
Nationwide House Prices (MoM) (JAN)
0.3%
0.2%
Low
7:00
GBP
Nationwide House Prices (YoY) (JAN)
6.6%
7.2%
Low
8:55
EUR
German Unemployment Change (JAN)
-10K
-27K
Medium
8:55
EUR
German Unemployment Rate (JAN)
6.5%
6.5%
Medium
9:00
EUR
Eurozone M3 Money Supply (YoY) (DEC)
3.5%
3.1%
Low
9:00
EUR
Eurozone M3 Money Supply (3M) (DEC)
3.1%
2.7%
Low
10:00
EUR
Eurozone Business Climate Indicator (JAN)
0.12
0.04
Low
10:00
EUR
Eurozone Industrial Confidence (JAN)
-4.5
-5.2
Low
10:00
EUR
Eurozone Consumer Confidence (JAN F)
-8.5
-10.9
Medium
10:00
EUR
Eurozone Economic Confidence (JAN)
101.6
100.7
Low
10:00
EUR
Eurozone Services Confidence (JAN)
6.0
5.6
Low
13:00
EUR
German CPI (MoM) (JAN P)
-0.8%
0.0%
High
13:00
EUR
German CPI (YoY) (JAN P)
-0.1%
0.2%
High
13:00
EUR
German CPI – EU Harmonised (MoM) (JAN P)
-1.0%
0.1%
Medium
13:00
EUR
German CPI – EU Harmonised (YoY) (JAN P)
-0.2%
0.1%
Medium
Critical Levels
CCY
Supp 3
Supp 2
Supp 1
Pivot Point
Res 1
Res 2
Res 3
EURUSD
1.0945
1.1144
1.1262
1.1343
1.1461
1.1542
1.1741
GBPUSD
1.4832
1.4996
1.5097
1.5160
1.5261
1.5324
1.5488
— Written by Ilya Spivak, Currency Strategist for DailyFX.com
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Source: Daily fx