Talking Points:
Soft Eurozone PMI Data May Mean More for Risk Appetite Than the Euro
New Zealand Dollar Swooned as Soft CPI Data Sank RBNZ Rate Hike Bets
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The preliminary set of October’s Eurozone PMI figures headlines the economic calendar in European hours. The region-wide composite reading is due to show the pace of manufacturing- and service-sector activity growth slowed for a third consecutive month, yielding the weakest results in 14 months. A soft print may carry greater implications for overall risk appetite than the Euro however.
The ECB seems resigned to complacency in the near term. Financial conditions in the region have deteriorated since mid-September even as the central bank introduced negative deposit rates and conducted its first TLTRO operation. Economic data outcomes swooned relative to expectations over the same period, pointing to trouble on the growth front. In response, ECB officials have counter-intuitively used public speaking opportunities to play down expectations for the upcoming asset purchase program.
On balance, this means that weak PMI readings are unlikely to be a strong negative catalyst for the single currency in as much as they probably won’t herald a forceful near-term response from Mario Draghi and company. Such results may amplify increasingly acute global slowdown fears however, fueling risk aversion and boosting demand for safety-linked assets like the Japanese Yen. We have entered short GBPJPY.
The New Zealand Dollar underperformed in overnight trade, dropping as much as 1.1 percent on average against its leading counterparts. The move tracked a slide in New Zealand bond yields as RBNZ interest rate hike bets unwound following a disappointing third-quarter CPI report. The headline year-on-year inflation rate unexpectedly dropped to 1 percent, the lowest in over a year.
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Asia Session
GMT
CCY
EVENT
ACT
EXP
PREV
21:45
NZD
CPI (QoQ) (3Q)
0.3%
0.5%
0.3%
21:45
NZD
CPI (YoY) (3Q)
1.0%
1.2%
1.6%
0:30
AUD
NAB Business Confidence (3Q)
6
–
6
1:35
JPY
Markit/JMMA Mfg PMI (OCT P)
52.8
51.7
51.7
1:45
CNY
HSBC Mfg PMI (OCT P)
50.4
50.2
50.2
European Session
GMT
CCY
EVENT
EXP
PREV
IMPACT
7:00
EUR
Markit France Mfg PMI (OCT P)
48.5
48.8
Medium
7:00
EUR
Markit France Services PMI (OCT P)
48.3
48.4
Medium
7:00
EUR
Markit France Comp PMI (OCT P)
48.7
48.4
Medium
7:30
EUR
Markit/BME Germany Mfg PMI (OCT P)
49.5
49.9
High
7:30
EUR
Markit/BME Germany Comp PMI (OCT P)
53.6
54.1
High
7:30
EUR
Markit Germany Services PMI (OCT P)
55.0
55.7
High
8:00
EUR
Markit Eurozone Comp PMI (OCT P)
51.5
52.0
High
8:00
EUR
Markit Eurozone Mfg PMI (OCT P)
49.9
50.3
High
8:00
EUR
Markit Eurozone Services PMI (OCT P)
52.0
52.4
High
8:30
GBP
Retail Sales ex Auto (MoM) (SEP)
0.0%
0.2%
Medium
8:30
GBP
Retail Sales ex Auto (YoY) (SEP)
3.4%
4.5%
Medium
8:30
GBP
Retail Sales Incl. Auto (MoM) (SEP)
-0.1%
0.4%
Medium
8:30
GBP
Retail Sales Incl. Auto (YoY) (SEP)
2.9%
3.9%
Medium
8:30
GBP
BBA Loans for House Purchase (SEP)
41450
41588
Low
9:00
EUR
Euro Area 2Q Government Debt
–
–
Low
10:00
GBP
CBI Trends Total Orders (OCT)
-3
-4
Low
10:00
GBP
CBI Trends Selling Prices (OCT)
0
1
Low
10:00
GBP
CBI Business Optimism (OCT)
15
19
Low
Critical Levels
CCY
Supp 3
Supp 2
Supp 1
Pivot Point
Res 1
Res 2
Res 3
EURUSD
1.2469
1.2572
1.2611
1.2675
1.2714
1.2778
1.2881
GBPUSD
1.5826
1.5945
1.5998
1.6064
1.6117
1.6183
1.6302
— Written by Ilya Spivak, Currency Strategist for DailyFX.com
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