Talking Points:

New Zealand Dollar Correction Helped by Supportive PSI, PPI Data
Euro Unlikely to Find Direction Cues in Construction Output Figures
US Dollar May Rise if Officials’ Comments Support “Tapering” QE

The New Zealand Dollar corrected higher as markets digested a swift two-day selloff at the end of last week. Supportive economic data likewise helped. The Performance of Services Index rose to 58.9 in April, suggesting activity in the non-manufacturing sector grew at the fastest pace in over six years. Separately, first-quarter PPI figures put the year-on-year wholesale inflation rate at 0.9 percent, a welcome rebound after the index recorded its first negative print in a year in the three months to December 2013. The currency rose as much as 0.3 percent on average against its leading counterparts.

Looking ahead, a quiet economic calendar in European hours and an empty one in the US session leave markets somewhat rudderless to start the trading week.Eurozone Construction Output figures amount to the only bit of data on the docket. While the trend has looked somewhat rosy over recent months, theEurois unlikely to find support in an upbeat outcome. Indeed, whatever the outcome, it will probably do little to discourage speculation about a forthcoming expansion of ECB stimulus efforts.

“Fed-speak” will be in the spotlight later in the day. Dallas and San Francisco Fed Presidents Richard Fisher and John Williams as well as former Chairman Ben Bernanke are due to cross the wires. The central issue at the heart of speculation about US monetary policy is whether the central bank will continue to “taper” QE asset purchases such that the program is wound down this year, laying the foundation for a subsequent round of interest rate hikes.

Soft performance in the first quarter spread doubt among investors, sending the US Dollar lower, but the FOMC has remained steadfast in its commitment to policy normalization. Meanwhile, US economic news-flow seems to have turned a corner, with a Citigroup gauge of data outcomes relative to expectations now at a three-month high having found a bottom in early April. Against this backdrop, commentary seen as favoring continued stimulus reduction is likely to help scatter doubts about the continuity of the tapering process, boosting the greenback.

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