The Euro may decline if soft Eurozone CPI data hints the ECB has increasingly ample room to ease monetary policy ahead of this week’s rate decision.
Talking Points
Euro at Risk if Soft CPI Print Prompts Dovish ECB Expectations
Disappointing US ISM Data May Weigh on Risk Appetite, Boost Yen
Major Currencies Little Changed vs. US Dollar in Quiet Asian Trade
A preliminary estimate of the March Eurozone CPI print headlines the economic calendar in European hours. Expectations call for the year-on-year inflation rate to slow to 1.6 percent, the lowest since June 2010. This hints the ECB is being offered increasingly ample room to stimulate growth without worrying about runaway price growth.
This may put downward pressure on the Euro ahead of this week’s interest rate decision. While the central bank is widely expected to maintain the policy mix unchanged, a soft CPI print in the context of lingering recession may prompt the markets to look for a dovish shift in rhetoric foreshadowing added easing on the horizon in the months ahead.
Later in the day, the spotlight turns to US ISM Non-Manufacturing Composite reading. Economists expect service-sector activity growth to slow a bit in March after setting a 12-month high in February. A Citigroup index tracking the performance of US economic data relative to expectations has snapped an uptrend in place since early February, suggesting news-flow may be taking on a dour tone once again A disappointing outcome similar to the factory-sector ISM print earlier in the week may weigh on risk appetite, encouraging an unwinding of carry trades and boosting the Japanese Yen.
Major currencies are trading little-changed against the US Dollar in late Asian trade absent a clear-cut catalyst for directional momentum. While official and HSBC versions of March’s Chinese Services PMI numbers offered conflicting cues, both metrics printed closely in line with trend averages, thereby offering little impetus to dislodge established expectations and spark volatility.
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Asia Session:
GMT
CCY
EVENT
ACT
EXP
PREV
0:00
AUD
HIA New Home Sales (MoM) (FEB)
-5.3%
4.2%
0:30
AUD
Trade Balance (A$) (FEB)
-178M
-1000M
-1215M (R-)
1:00
CNY
Non-manufacturing PMI (MAR)
55.6
–
54.5
1:45
CNY
HSBC Services PMI (MAR)
54.3
–
52.1
Euro Session:
GMT
CCY
EVENT
EXP
PREV
IMPACT
8:30
GBP
PMI Construction (MAR)
48.0
46.8
Medium
9:00
EUR
Euro-Zone CPI Estimate (YoY) (MAR)
1.6%
1.8%
High
Critical Levels:
CCY
SUPPORT
RESISTANCE
EURUSD
1.2767
1.2863
GBPUSD
1.4994
1.5209
— Written by Ilya Spivak, Currency Strategist for Dailyfx.com
To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak
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Source: Daily fx