Talking Points:

Euro May Not Find Support in Upbeat German ZEW Survey Data
Yen Drops as China Counters Shibor Spike, Boosting the Nikkei
US Dollar Soars as 10-year Treasury Yields Rebound Overnight

Germany’s ZEW Survey of analyst sentiment headlines the economic calendar in European hours. The forward-looking Expectations index is expected to rise to 64.0, an eight-year high. The improvement may not offer a meaningful boost to the Euro however.

The sharp rise in the ZEW metric over recent months has coincided with deterioration in regional economic data as well as a drop in the priced-in ECB outlook. Indeed, a Credit Suisse gauge measuring investors’ 12-month policy expectations is now hovering around an eight-month low. That suggests the improvement in sentiment may reflect hopes for further easing, a prospect that hardly bodes well for the single currency.

The Japanese Yen underperformed in overnight trade, sliding as much as 0.5 percent on average against its leading counterparts. The move reflected ebbing haven demand, tracking a rebound in the benchmark Nikkei 225 stock index. The newswires attributed the chipper mood to a pullback in Chinese borrowing costs. The baseline 7-day Shibor lending rate pulled back to 5.535 percent, down from a monthly high of 6.329 percent recorded yesterday, after the PBOC injected funds into the country’s largest commercial banks.

Meanwhile, the US Dollar pushed higher against its G10 FX peers on the back of yield-driven buying as the benchmark 10-year Treasury bond rate jumped 4bps to a three-day high. A singular catalyst behind the snapback in yields is not readily apparent. Corrective flows may be the culprit, particularly as liquidity returns following yesterday’s US holiday lull, after the 10-year rate hit a one-month low last week.

New to FX? START HERE!

Asia Session

GMT

CCY

EVENT

ACT

EXP

21:45

NZD

Consumer Prices Index (QoQ) (4Q)

0.1%

-0.1%

0.9%

21:45

NZD

Consumer Prices Index (YoY) (4Q)

1.6%

1.5%

1.4%

5:00

JPY

Supermarket Sales (YoY) (DEC)

-0.8%

–

0.7%

European Session

GMT

CCY

EVENT

EXP/ACT

IMPACT