Euro May Rise on German, Euro Zone GDP and Risky Assets Rebound

Key Overnight Developments

• New Zealand Dollar Soars vs Major Currencies as Retail Sales Outperform
• US Dollar, Japanese Yen Pare Gains as Asian Stocks Advance on Earnings

Critical Levels

The Euro and the British Pound advanced in overnight trade, adding 0.3 percent each against the US Dollar as a recovery across Asian stock exchanges sapped demand for the safety-linked currency. We remain flat EURUSD and GBPUSD.

Asia Session Highlights

New Zealand Retail Sales figures surprised sharply to the upside, with core receipts (excluding auto-related spending) soaring 1.5 percent in June. The quarterly result also outperformed, topping the consensus forecast by a full percentage point. Sales at supermarkets and grocery stores added 0.8 percent while those at department stores rose 1.2 percent. The outcome amounted to a counterargument to last week’s disappointing employment report as traders debate whether the central bank will have scope to continue raising interest rates in September. Indeed, a Credit Suisse gauge of priced-in expectations for the next policy meeting snapped two consecutive days of losses to rise 2 percentage points following the outcome, sending the New Zealand Dollar higher against all of its G10 counterparts.

The US Dollar and Japanese Yen sold off against the spectrum of major currencies as stocks rebounded in Asian trade, paring demand for the safety-linked assets. The MSCI Asia Pacific regional benchmark index rose 0.4 percent on positive earnings reports from companies including Genting Singapore Plc and MS&AD Insurance Group Holdings Inc.

Euro Session: What to Expect

European Gross Domestic Product figures headline the calendar. German output is set to add 1.3 percent in the three months through June while the overall Euro Zone economy grows 0.7 percent, with both outcomes marking the largest quarterly gains in over two years. Traders are surely looking past the second quarter at this point as they size up the headwinds from deficit-cutting measures (including rising borrowing costs on the back of increased debt issuance as well as a sharp fiscal retrenchment). That said, the outcomes may be treated as reason enough drive the Eurohigher, with traders likely eager to take some profits off the table ahead of the weekend after the sharp moves earlier in the week.

Turning to sentiment, US equity index futures are trading firmly higher in late Asian hours, up 0.5 percent to hint that the safety-linked US Dollar and Japanese Yen are likely to trim recent gains as most major currencies rise along with a rebound in risk appetite.

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