Talking Points:
Euro at Risk if German CPI Miss Prompts ECB Stimulus Expansion Bets
Markets Overlook Strong Set of German Unemployment Data as Expected
US Dollar Volatility Risk Favors Upside as Markets Await 4Q GDP Data
The preliminary set of January’s German CPI figures headlines the economic calendar in European hours. Expectations call for the headline year-on-year inflation rate to rise to 1.5 percent, marking the highest reading since August.
Leading PMI data from Markit Economics estimated the price growth rate at a four-month low however, opening the door for a downside surprise. Such an outcome is likely to bode ill for the Euro amid speculation about an expansion of ECB stimulus and we remain short EURUSD. A better-than-expected German Unemployment report produced next to no response from the single currency, as expected.
Later in the day, the spotlight turns to the first estimate of the fourth-quarter US GDP print. Economic news-flow has gradually deteriorated relative to expectations in recent weeks (according to data from Citigroup), with notable miss on December’s Nonfarm Payrolls print.
A similar pattern is expected on the GDP front: the year-on-year growth rate is seen slowing to 3.2 percent from 4.1 percent recorded in the third quarter.A late-2013 soft patch in the US recovery clearly didn’t prompt the Fed to slow the pace of QE reduction, so a print in line with forecasts is unlikely to offer fresh fodder for US Dollar sellers. On the other hand, an upside surprise would mark a departure from recent dynamics and has scope to push the greenback higher.
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Asia Session
GMT
CCY
EVENT
ACT
EXP
PREV
20:00
NZD
RBNZ Interest Rate Decision
2.50%
2.50%
2.50%
21:45
NZD
Net Migration s.a. (DEC)
2820
–
2760
21:45
NZD
Building Permits (MoM) (DEC)
7.6%
-5.0%
12.5%
23:50
JPY
Loans & Discounts Corp (YoY) (DEC)
2.24%
–
2.59%
23:50
JPY
Retail Trade (YoY) (DEC)
2.6%
3.9%
4.1%
23:50
JPY
Retail Trade s.a. (MoM) (DEC)
0.8%
0.3%
2.0%
23:50
JPY
Large Retailers’ Sales
0.1%
0.7%
0.6%
0:00
AUD
HIA New Home Sales (MoM) (DEC)
-0.4%
–
7.5%
0:30
AUD
Import Price Index (QoQ) (4Q)
-0.6%
2.0%
6.1%
0:30
AUD
Export Price Index (QoQ) (4Q)
-0.5%
-0.2%
4.2%
1:45
CNY
HSBC/Markit Manufacturing PMI (JAN)
49.5
49.6
50.5
European Session
GMT
CCY
EVENT
EXP/ACT
PREV
IMPACT
8:00
CHF
KOF Swiss Leading Indicator (JAN)
1.98 (A)
1.95
Medium
8:55
EUR
German Unemployment Rate s.a. (JAN)
6.8% (A)
6.8%
High
8:55
EUR
German Unemployment Change (JAN)
-28K (A)
-19K
High
9:30
GBP
Net Consumer Credit (DEC)
0.7B
0.6B
Low
9:30
GBP
Net Lending Sec. on Dwellings (DEC)
1.2B
0.9B
Low
9:30
GBP
Mortgage Approvals (DEC)
72.9K
70.8K
Medium
9:30
GBP
M4 Money Supply (MoM) (DEC)
–
0.0%
Low
9:30
GBP
M4 Money Supply (YoY) (DEC)
–
2.7%
Low
9:30
EUR
M4 Ex IOFCs 3M Annualised (DEC)
5.2%
4.9%
Low
10:00
EUR
Eurozone Economic Confidence (JAN)
101
100
Low
10:00
EUR
Eurozone Consumer Confidence (JAN F)
-11.7
-11.7
Medium
10:00
EUR
Eurozone Services Confidence (JAN)
0.8
0.2
Low
10:00
EUR
Eurozone Industrial Confidence (JAN)
-2.9
-3.4
Low
10:00
EUR
Eurozone Business Climate Indicator (JAN)
0.35
0.27
Low
13:00
EUR
German CPI (MoM) (JAN P)
-0.4%
0.4%
High
13:00
EUR
German CPI (YoY) (JAN P)
1.5%
1.4%
High
13:00
EUR
German CPI – EU Harmonised (MoM) (JAN P)
-0.6%
0.5%
Low
13:00
EUR
German CPI – EU Harmonised (YoY) (JAN P)
1.3%
1.2%
Low
Critical Levels
CCY
Supp 3
Supp 2
Supp 1
Pivot Point
Res 1
Res 2
Res 3
EUR/USD
1.3486
1.3568
1.3615
1.3650
1.3697
1.3732
1.3814
GBP/USD
1.6403
1.6484
1.6524
1.6565
1.6605
1.6646
1.6727
— Written by Ilya Spivak, Currency Strategist for DailyFX.com
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