US Dollar May Fall as Fed-Speak Underpins Bets on Rate Hike Delay

Talking Points:

Euro Unlikely to Find Follow-Through in Upbeat German IFO Survey Data
US Dollar May Decline as Fed Commentary Supports Dovish Outlook Shift
New Zealand Dollar Underperforms on Soft Trade Balance Data Overnight

Germany’s IFO Survey of business confidence headlines the economic calendar in European trading hours. The forward-looking Expectations index is expected to rise for the fifth consecutive month in March, registering at the highest level since July. The outcome seems unlikely to offer much by way of lasting Euro volatility however considering the results’ limited impact on the near-term ECB policy outlook. Indeed, sentiment may be improving because the central bank has expanded stimulus efforts, which hardly seems like a supportive narrative for the single currency.

Later in the day, “Fed-speak” returns to the spotlight as Charles Evans – the President of the central bank’s Chicago branch – takes to the wires. Traders pushed out the likely timeline for the first post-QE rate interest hike after last week’s FOMC meeting, with Fed Funds futures now pointing to an increase in September (versus the June/July consensus prevailing ahead of the Fed announcement). Rhetoric supporting thisshift from the typically dovish Mr. Evans may weigh on the US Dollar.

The New Zealand Dollar underperformed in overnight trade, falling as much as 0.3 percent on average against its top counterparts. The move followed a disappointing Trade Balance data set that put the year-to-date deficit a –NZ$2.18 billion in February, the highest since August 2009. The British Pound corrected broadly higher after sinking against all of the majors yesterday on the back of soft CPI figures, as expected. The Japanese Yen likewise advanced on regional haven flows as the benchmark Nikkei 225 stock index declined.

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