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US Dollar May Fall if Soft Core Inflation Data Cools Fed Rate Hike Bets
DailyFX.com -
Talking Points:
Euro, Pound Unlikely to Find Volatility in UK GDP and German Jobs Data
US Dollar May Decline if Soft Core CPI Weighs on Fed Rate Hike Outlook
Australian Dollar Down as Weak Capex Report Boosts RBA Rate Cut Bets
The economic calendar is relatively quiet in European trading hours. A marginal improvement on German Unemployment figures is unlikely to prove formative for the Euro considering its limited implications for ECB monetary policy as the central bank prepares to launch QE next month.
The same is likely for revised of fourth-quarter UK GDP data. The British Pound did not yield a strong response to this week’s testimony from Bank of England Governor Mark Carney, suggesting near-term policy bets are well priced into the market. That means anything shy of a game-changing revision is unlikely to trigger an outsized response from Sterling.
Later in the day, the spotlight turns to January’s US CPI report. Traders will focus on the Core reading that excludes the volatile food and energy prices dismissed by Fed policymakers. This is seen putting the year-on-year inflation rate at 1.6 percent, unchanged from December. US data flow has increasingly lagged relative to forecasts in recent months however, warning of a possible downside surprise that cools FOMC rate hike bets and weighs on the US Dollar.
The Australian Dollar underperformed in overnight trade, falling as much as 0.6 percent on average against its leading counterparts. The move followed a disappointing Private Capital Expenditure report. Capex fell 2.2 percent in the fourth quarter, undershooting forecasts calling for a 1.6 percent decline.
The Aussie’s down move tracked a decline in Australia’s benchmark 10-year bond yield, suggesting soft news-flow fueled interest rate cut speculation. As it stands, investors are pricing in a 55 percent probability of a 25 basis point reduction in the baseline lending rate at next week’s RBA policy meeting.
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Asia Session
GMT | CCY | EVENT | ACT | EXP | PREV |
21:45 | NZD | Trade Balance (NZ$) (JAN) | 56M | -158M | -195M |
21:45 | NZD | Exports (JAN) | 3.70B | 3.73B | 4.40B |
21:45 | NZD | Imports (JAN) | 3.64B | 3.94B | 4.60B |
21:45 | NZD | Trade Balance 12 Mth YTD (NZ$) (JAN) | -1409M | -1600M | -1180M |
21:45 | NZD | Net Migration SA (JAN) | 5540 | - | 4100 |
0:30 | AUD | Private Capital Expenditure (4Q) | -2.2% | -1.6% | 0.6% |
European Session
GMT | CCY | EVENT | EXP | PREV | IMPACT |
7:00 | EUR | German GfK Consumer Confidence (MAR) | 9.5 | 9.3 | Low |
8:15 | CHF | Industrial Output (YoY) (4Q) | - | -0.4% | Low |
8:55 | EUR | German Unemployment Change (FEB) | -10K | -9K | Medium |
8:55 | EUR | German Unemployment Rate (FEB) | 6.5% | 6.5% | Medium |
9:00 | EUR | Eurozone M3 (YoY) (JAN) | 3.7% | 3.6% | Low |
9:00 | EUR | Eurozone M3 3-mo Avg (JAN) | 3.4% | 3.1% | Low |
9:30 | GBP | GDP (QoQ) (4Q P) | 0.5% | 0.5% | Medium |
9:30 | GBP | GDP (YoY) (4Q P) | 2.7% | 2.7% | Medium |
9:30 | GBP | Private Consumption (QoQ) (4Q P) | 0.8% | 0.9% | Low |
9:30 | GBP | Government Spending (QoQ) (4Q P) | 0.2% | 0.3% | Low |
9:30 | GBP | Gross Fixed Capital Formation (QoQ) (4Q P) | 0.8% | 0.1% | Low |
9:30 | GBP | Exports (QoQ) (4Q P) | 1.1% | 0.6% | Low |
9:30 | GBP | Imports (QoQ) (4Q P) | 1.5% | 1.3% | Low |
9:30 | GBP | Total Business Investment (QoQ) (4Q P) | - | -1.4% | Low |
9:30 | GBP | Total Business Investment (YoY) (4Q P) | - | 5.2% | Low |
9:30 | GBP | Index of Services (MoM) (DEC) | 0.4% | 0.1% | Low |
9:30 | GBP | Index of Services (3M/3M) (DEC) | 0.8% | 0.8% | Low |
10:00 | EUR | Eurozone Business Climate Indicator (FEB) | 0.23 | 0.16 | Low |
10:00 | EUR | Eurozone Industrial Confidence (FEB) | -4.5 | -5 | Low |
10:00 | EUR | Eurozone Consumer Confidence (FEB F) | -6.7 | -6.7 | Low |
10:00 | EUR | Eurozone Economic Confidence (FEB) | 102 | 101.2 | Low |
10:00 | EUR | Eurozone Services Confidence (FEB) | 5.5 | 4.8 | Low |
Critical Levels
CCY | Supp 3 | Supp 2 | Supp 1 | Pivot Point | Res 1 | Res 2 | Res 3 |
EURUSD | 1.1256 | 1.1309 | 1.1335 | 1.1362 | 1.1388 | 1.1415 | 1.1468 |
GBPUSD | 1.5321 | 1.5413 | 1.5470 | 1.5505 | 1.5562 | 1.5597 | 1.5689 |
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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