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FOREX: Currencies Mirror Mixed Risk Trends, Euro Zone CPI on Tap

FOREX: Currencies Mirror Mixed Risk Trends, Euro Zone CPI on Tap

2011-02-28 06:28:00
Ilya Spivak, Sr. Currency Strategist
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Overnight Headlines

  • Currencies Mirror Indecisive Risk Trends as Protests Hit Oman
  • New Zealand PM Key Says Earthquake May Cost Up to NZ$15 Billion
  • Australian Companies’ Operating Profits Slump for Second Quarter

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.3699

1.3823

GBPUSD

1.6039

1.6166

The Euro and the British Pound were little changed ahead of the opening bell in Europe; both currencies sank amid risk aversion in the opening hours of the overnight session but erased those losses as risk appetite broadly recovered (see below). We have entered short NZDUSD.

Asia Session: What Happened

CCY

GMT

EVENT

ACT

EXP

PREV

NZD

21:45

Trade Balance (NZ$) (JAN)

11M

-25M

-264M (R-)

NZD

21:45

Balance YTD (NZ$) (JAN)

865M

860M

1125M (R-)

NZD

21:45

Exports (NZ$) (JAN)

3.29B

3.62B

3.80B

NZD

21:45

Imports (NZ$) (JAN)

3.28B

3.37B

4.06B (R-)

JPY

23:15

Nomura/JMMA Manufacturing PMI (FEB)

52.9

-

51.4

AUD

23:30

RP Data-Rismark House Px SA (MoM) (JAN)

-1.6%

-

0.2%

AUD

23:30

RP Data-Rismark House Px (MoM) (JAN)

-0.9%

-

-0.7%

AUD

23:30

TD Securities Inflation (YoY) (FEB)

3.6%

-

3.4%

AUD

23:30

TD Securities Inflation (MoM) (FEB)

0.2%

-

0.4%

JPY

23:50

Industrial Production (MoM) (JAN P)

2.4%

4.0%

3.3%

JPY

23:50

Industrial Production (YoY) (JAN P)

4.7%

6.0%

4.9%

JPY

23:50

Retail Trade s.a. (MoM) (JAN)

4.1%

2.7%

-4.2% (R-)

JPY

23:50

Retail Trade (YoY) (JAN)

0.1%

-1.5%

-2.1% (R-)

JPY

23:50

Large Retailers' Sales (JAN)

-0.7%

-1.0%

-1.7% (R+)

AUD

0:15

CBAHIA House Affordability (4Q)

53.5

-

54.4

AUD

0:30

Company Operating Profit (QoQ) (4Q)

-2.8%

1.0%

-2.8% (R-)

AUD

0:30

Inventories (4Q)

0.7%

-0.5%

-0.9% (R-)

AUD

0:30

Private Sector Credit (MoM) (JAN)

0.3%

0.3%

0.2%

AUD

0:30

Private Sector Credit (YoY) (JAN)

3.3%

3.2%

3.4%

NZD

2:00

NBNZ Activity Outlook (FEB)

36.6

-

34.5

NZD

2:00

NBNZ Business Confidence (FEB)

34.5

-

29.5

NZD

2:00

Money Supply M3 (YoY) (JAN)

4.4%

-

3.3% (R+)

NZD

2:00

Terms of Trade Index (QoQ) (4Q)

0.6%

-

3.0%

JPY

4:00

Vehicle Production (YoY) (JAN)

-6.3%

-

-5.1%

JPY

5:00

Small Business Confidence (FEB)

46.6

-

45.8

JPY

5:00

Housing Starts (YoY) (JAN)

2.7%

5.1%

7.5%

JPY

5:00

Annualized Housing Starts (JAN)

0.847M

0.873M

0.861M

JPY

5:00

Construction Orders (YoY) (JAN)

-10.7%

-

13.1%

Currency markets looked past a busy economic calendar to trade with risk sentiment, mirroring the knee-jerk swings of S&P 500 stock index futures in overnight trade. The week opened on a sour note as revolutionary turmoil gripping the Middle East over recent weeks spread to Oman – the second major oil producer after Libya to see a flare-up of protests – rebooting fears that a sharp increase in crude prices may derail the global economic recovery. Prices found a bottom mid-session however, rebounding toward weekly open levels to yield a flat result and pushing the risk-linked Australian and New Zealand Dollars higher to erase losses sustained earlier in the day. The US Dollar traded narrowly lower as Treasury bonds extended last week’s advance, putting downward pressure on yields for the benchmark USD-denominated assets.

New Zealand’s Trade Balance unexpectedly posted a surplus for the first time in seven months in January as imports fell 19.2 percent to the lowest in nearly a year. Meanwhile, NBNZ Business Confidence edged higher, showing 36.6 percent of companies surveyed for the report expect sales and profits to rise over the next 12 months. Separately, New Zealand Prime Minister John Key said repairs from last week’s earthquake in Christchurch will cost up to NZ$15 billion and announced a subsidy plan for affected businesses to continue paying wages to as many as 42,000 workers for six weeks.

An estimate of Australian inflation from TD Securities showed price growth snapped a two-month losing streak in February, with the annual growth rate rising to 3.6 percent. Company Operating Profits disappointed, slumping 2.8 percent for a second consecutive quarter in the three months through December 2010. Preliminary Japanese Industrial Production figures fell short of expectations, showing output increased 4.7 percent in the year to January, falling short of forecasts calling for a 6 percent gain and reinforcing stagnant conditions in place since October.

Euro Session: What to Expect

CCY

GMT

EVENT

EXP

PREV

IMPACT

EUR

7:00

German Import Price Index (MoM) (JAN)

1.1%

2.3%

Low

EUR

7:00

German Import Price Index (YoY) (JAN)

11.2%

12.0%

Low

EUR

7:45

French Producer Prices (MoM) (JAN)

0.9%

1.0%

Low

EUR

7:45

French Producer Prices (YoY) (JAN)

5.6%

5.4%

Low

EUR

10:00

Euro-Zone Consumer Price Index Core (YoY) (JAN)

1.2%

1.1%

Medium

EUR

10:00

Euro-Zone Consumer Price Index (MoM) (JAN)

-0.6%

0.6%

Medium

EUR

10:00

Euro-Zone Consumer Price Index (YoY) (JAN)

2.4%

2.4%

Medium

A cloud of indecision continues to hang over the markets ahead of the opening bell in Europe with the spread of protests into Oman complicating what was already likely to be a volatile week in the financial markets. As with Asia, the initial reaction seems likely to be negative with WTI and Brent crudeoilup over 1 percent apiece, reigniting fears that regional turmoil may derail the global recovery. However, a similar reaction fizzled out quickly overnight so reading anything concrete into early price action seems like a dangerous proposition.

On the data front, the final revision of January’s Euro Zone Consumer Price Index figures are set to confirm the annual inflation rate at 2.4 percent – the highest in over two years – underpinning expectations of a hawkish turn at the European Central Bank policy meeting later in the week. The result may prove to have only limited impact on the Euro however considering the comments from a slew of ECB officials have already done a good deal of perception-setting over recent weeks, hinting much of the shift in tone may be already priced into exchange rates. US Personal Spending and Income figures are due later in the session.

For real time news and analysis, please visit http://www.dailyfx.com/real_time_news

To receive future articles by email, please contact Ilya at ispivak@dailyfx.com

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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