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Forex: Euro to Look Past German Data, Focus on ECB Annual Report

By , Currency Strategist
07 April 2014 05:14 GMT

Talking Points:

  • German Industrial Production, Swiss CPI Likely to Pass Without Fanfare
  • AQR Cues in the ECB Annual Report May Be Market-Moving for the Euro
  • Aussie Dollar Down, Japanese Yen Higher as Stocks Drop in Asian Trade

A relatively quiet European economic calendar is headlined by February’s German Industrial Production and March’s Swiss Consumer Price Index figures. The former report is due to the year-on-year output growth rate marginally slowed to 4.7 percent from the 5 percent recorded in February. The latter is set to put the headline inflation rate at -0.1 percent, matching the prior month’s result. Neither release is likely to produce a significant response from price action given their limited implications for traders’ ECB and SNB monetary policy outlook.

The release of the ECB Annual Report may prove of greater note. Traders continue to speculate on the possibility that the deepening disinflation will prompt the central bank to expand monetary stimulus. We’ve argued that Mario Draghi and company are waiting for their Asset Quality Review (AQR) to be well-enough along to reveal the gap in policy transmission that has produced cheap borrowing costs in the interbank space without arresting the slide in lending to the real economy. That will set the stage for crafting an easing effort that repairs or bypasses the hole in the stimulus delivery mechanism. With that in mind, an AQR progress report in the Annual Report may prove market-moving for the Euro.

The Australian Dollar underperformed in otherwise quiet overnight trade, sliding as much as 0.2 percent against its US namesake. The move appeared corrective after the Aussie outperformed against the greenback on Friday in the wake of a mild disappointment on March’s US nonfarm payrolls print. A selloff on Asian stock exchanges likewise didn’t offer any favors to the sentiment-linked survey. The MSCI Asia Pacific regional benchmark index fell 0.5 percent in what looked like playing catch-up to Friday’s selloff on Wall Street. The Japanese Yen traded higher as the risk-off mood bolstered haven demand for the haven currency.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

23:30

AUD

AiG Performance of Construction Index (MAR)

46.2

-

44.2

23:50

JPY

Official Reserve Assets (MAR)

$1279.3B

-

$1288.2B

1:01

NZD

QV House Prices (YoY) (MAR)

8.8%

-

9.3%

1:30

AUD

ANZ Job Advertisements (MoM) (MAR)

1.4%

-

4.7%

5:00

JPY

Leading Index (FEB P)

108.5

108.8

113.1

5:00

JPY

Coincident Index (FEB P)

113.4

113.4

115.2

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

6:00

EUR

German Industrial Production (MoM)

0.3%

0.8%

Medium

6:00

EUR

German Industrial Production (YoY)

4.7%

5.0%

Medium

6:30

AUD

Foreign Reserves (A$) (MAR)

-

51.8B

Low

7:00

CHF

Foreign Currency Reserves (MAR)

434.5B

433.5B

Low

7:15

CHF

Consumer Price Index (MoM) (MAR)

0.2%

0.1%

Medium

7:15

CHF

Consumer Price Index (YoY) (MAR)

-0.1%

-0.2%

Medium

7:15

CHF

CPI EU Harmonized (MoM) (MAR)

0.5%

-0.1%

Low

7:15

CHF

CPI EU Harmonized (YoY) (MAR)

-0.2%

-0.2%

Low

8:00

EUR

Italian Deficit to GDP (YTD) (4Q)

-

3.7%

Low

8:30

GBP

Lloyds Employment Confidence (MAR)

-

-2

Low

8:30

EUR

Eurozone Sentix Investor Confidence (APR)

13.9

13.9

Low

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EUR/USD

1.3587

1.3645

1.3675

1.3703

1.3733

1.3761

1.3819

GBP/USD

1.6479

1.6529

1.6552

1.6579

1.6602

1.6629

1.6679

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

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07 April 2014 05:14 GMT