Talking Points:
British Pound May Rise as BOE Testimony Fuels Rate Hike Speculation
US Dollar Disproportionately Vulnerable to Losses on Yellen Comments
RBNZ Survey Puts Inflation Outlook at 15-Year Low, Sinks Kiwi Dollar
Bank of England monetary policy expectations will be in focus in European trading hours as Governor Mark Carney, Deputy Governor Ben Broadbent and MPC committee member Martin Weale testify about the latest quarterly Inflation Report to Parliament’s Treasury Committee. The hawkish-sounding document triggered a rebuilding of rate hike expectations (as expected) when it was unveiled and more of the same may boost the British Pound. We are now long GBPUSD and short EURGBP.
Later in the day, the spotlight turns to Federal Reserve Chair Janet Yellen, who is due to deliver her semi-annual Congressional testimony on monetary policy and the global economic outlook. As with last week’s publication of minutes from January’s FOMC meeting, the outing may carry a disproportionally higher risk of diminishing Fed rate hike bets versus the alternative.
The US Dollar has been unable to rise even when key economic data proved clearly supportive (like January’s payrolls report) while speculative net-long USD positioning is near a record high. On balance, this warns that the “policy divergence” narrative that propelled the greenback higher since mid-2014 may be running out of fresh fodder. If Yellen restates recently voiced worries about an increasingly wobbly global environment, that may pour cold water on tightening speculation and send the US unit downward.
The New Zealand Dollar underperformed in overnight trade, falling as much as 0.6 percent on average against the majors, after an RBNZ survey of inflation expectations showed businesses’ two-year outlook put price growth at a 15-year low of 1.8 percent. The Kiwi’s slide tracked a drop in front-end yields, hinting the drop in price growth bets weighed on interest rate hike prospects.
The Australian and Canadian Dollars followed their commodity bloc counterpart downward, losing as much as 0.3 and 0.2 percent respectively. Meanwhile, the Yen declined as Japan’s benchmark Nikkei 225 stock index advanced, undermining demand for the safety-linked currency.
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Asia Session
GMT
CCY
EVENT
ACT
EXP
PREV
22:30
AUD
ANZ Roy Morgan Weekly Consumer Conf
110.8
–
109.8
23:50
JPY
PPI Services (YoY) (JAN)
3.4%
3.6%
3.5%
2:00
NZD
RBNZ 2yr Inflation Expectation (1Q)
1.8%
–
2.1%
5:00
JPY
Small Business Confidence (FEB)
46.5
47.0
46.3
European Session
GMT
CCY
EVENT
EXP
PREV
IMPACT
7:00
EUR
German GDP s.a. (QoQ) (4Q F)
0.7%
0.7%
Medium
7:00
EUR
German GDP w.d.a (YoY) (4Q F)
1.4%
1.4%
Medium
7:00
EUR
German GDP n.s.a (YoY) (4Q F)
1.6%
1.6%
Medium
7:00
EUR
German Private Consumption (QoQ) (4Q)
0.7%
0.7%
Low
7:00
EUR
German Government Spending (QoQ) (4Q)
0.2%
0.6%
Low
7:00
EUR
German Capital Investment (QoQ) (4Q)
0.8%
-0.9%
Low
7:00
EUR
German Construction Investment (QoQ) (4Q)
1.0%
-0.3%
Low
7:00
EUR
German Domestic Demand (QoQ) (4Q)
0.6%
-0.2%
Low
7:00
EUR
German Exports (QoQ) (4Q)
1.2%
1.9%
Low
7:00
EUR
German Imports (QoQ) (4Q)
1.0%
1.7%
Low
7:45
EUR
French Business Confidence (FEB)
95
94
Low
7:45
EUR
French Manufacturing Confidence (FEB)
99
99
Low
7:45
EUR
French Production Outlook Indicator (FEB)
–
-11
Low
7:45
EUR
French Own-Company Production Outlook (FEB)
–
13
Low
10:00
EUR
Italy Current Account Balance (DEC)
–
3482M
Low
10:00
GBP
BOE’s Carney, MPC Members Testify on QIR
–
–
High
10:00
EUR
Eurozone CPI (MoM) (JAN)
-1.6%
-0.1%
Medium
10:00
EUR
Eurozone CPI (YoY) (JAN F)
-0.6%
-0.6%
Medium
10:00
EUR
Eurozone CPI Core (YoY) (JAN F)
0.6%
0.6%
Medium
14:00
EUR
ECB’s Draghi Speaks in Frankfurt
–
–
High
Critical Levels
CCY
Supp 3
Supp 2
Supp 1
Pivot Point
Res 1
Res 2
Res 3
EURUSD
1.1113
1.1230
1.1282
1.1347
1.1399
1.1464
1.1581
GBPUSD
1.5138
1.5280
1.5368
1.5422
1.5510
1.5564
1.5706
— Written by Ilya Spivak, Currency Strategist for DailyFX.com
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