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Forex: Euro May Fall on Soft CPI Data, US Dollar Eyeing Yellen Speech

By , Currency Strategist
31 March 2014 03:38 GMT

Talking Points:

  • Euro May Fall on ECB Easing Bets as CPI Drops to Lowest in 4 Years
  • US Dollar May Rise if Yellen Commentary Maintains Hawkish Overtones
  • Aussie Dollar Underperformed in Asia, Profit-Taking a Possible Driver

March’s preliminary Eurozone CPI report headlines the economic calendar in European hours. Expectations call for the headline year-on-year inflation rate to decline to 0.6 percent, the lowest since November 2009.

Leading cues from March PMI data seemingly bolster the probability of a soft outcome. Weak price growth readings may fuel concerns about continued disinflation and drive speculation about a near-term expansion of ECB stimulus efforts ahead of this week’s ECB policy announcement, weighing on the Euro.

Later in the day, the spotlight will shift to scheduled remarks from Federal Reserve Chair Janet Yellen. She is set to speak at the National Interagency Community Reinvestment Conference. While it is unclear that Yellen’s speech will contain content pertinent to investors’ outlook for Fed monetary policy, the possibility that this is the case exists.

With that in mind, traders will listen carefully to glean the tone of the central bank chief’s rhetoric for confirmation of the relatively hawkish tilt noted following the March FOMC meeting. Needless to say, the presence of such cues is likely to bode well for the US Dollar.

The Australian Dollar underperformed in otherwise quiet overnight trade, sliding as much as 0.2 percent on average against its leading counterparts. A discrete trigger for the move was not readily apparent, hinting weakness may have reflected profit-taking after the Aussie outpaced its G10 FX counterparts to add 1.8 percent against the greenback last week.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

21:45

NZD

Building Permits (MoM) (FEB)

-1.7%

2.0%

-8.6%

23:01

GBP

Hometrack Housing Survey (MoM) (MAR)

0.6%

-

0.7%

23:01

GBP

Hometrack Housing Survey (YoY) (MAR)

5.7%

-

5.4%

23:15

JPY

Markit/JMMA Manufacturing PMI (MAR)

53.9

-

55.5

23:30

AUD

TD Securities Inflation (MOM) (MAR)

0.2%

-

0.2%

23:30

AUD

TD Securities Inflation (YoY) (MAR)

2.7%

-

2.7%

23:50

JPY

Industrial Production (MoM) (FEB P)

-2.3%

0.3%

3.8%

23:50

JPY

Industrial Production (YoY) (FEB P)

6.9%

9.9%

10.3%

0:00

AUD

HIA New Home Sales (MoM) (FEB)

4.6%

-

0.5%

0:00

NZD

ANZ Activity Outlook (MAR)

58.2

-

58.5

0:00

NZD

NBNZ Business Confidence (MAR)

67.3

-

70.8

0:30

AUD

Private Sector Credit (MoM) (FEB)

0.4%

0.4%

0.4%

0:30

AUD

Private Sector Credit (YoY) (FEB)

4.3%

4.3%

4.1%

2:00

NZD

Money Supply M3 (YoY) (FEB)

6.9%

-

7.0%

4:00

JPY

Vehicle Production (YoY) (FEB)

-

-

14.5%

5:00

JPY

Housing Starts (YoY) (FEB)

-

6.1%

12.3%

5:00

JPY

Annualized Housing Starts (FEB)

-

0.968M

0.987M

5:00

JPY

Construction Orders (YoY) (FEB)

-

-

15.2%

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

6:00

EUR

German Retail Sales (MoM) (FEB)

-0.5%

1.7%

Low

6:00

EUR

German Retail Sales (YoY) (FEB)

0.8%

0.9%

Low

6:45

EUR

French GDP (YoY) (4Q F)

0.8%

0.8%

Medium

6:45

EUR

French GDP (QoQ) (4Q F)

0.3%

0.3%

Medium

7:00

CHF

KOF Swiss Leading Indicator (MAR)

2.05

2.03

Low

8:30

GBP

Mortgage Approvals (FEB)

75.0K

76.9K

Medium

8:30

GBP

M4 Money Supply (MoM) (FEB)

-

0.3%

Low

8:30

GBP

M4 Money Supply (YoY) (FEB)

-

-0.3%

Low

8:30

GBP

M4 Ex IOFCs 3M Annualised (FEB)

-

1.6%

Low

8:30

GBP

Net Consumer Credit (FEB)

0.7B

0.7B

Low

8:30

GBP

Net Lending Sec. on Dwellings (FEB)

1.4B

1.4B

Low

9:00

EUR

Euro-Zone CPI Estimate (YoY) (MAR)

0.6%

0.8%

High

9:00

EUR

Euro-Zone CPI - Core (YoY) (MAR A)

0.8%

1.0%

High

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EUR/USD

1.3607

1.3675

1.3713

1.3743

1.3781

1.3811

1.3879

GBP/USD

1.6523

1.6576

1.6607

1.6629

1.6660

1.6682

1.6735

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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31 March 2014 03:38 GMT