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FOREX: Euro Risk to the Upside Ahead of German ZEW Data, Fed on Tap

FOREX: Euro Risk to the Upside Ahead of German ZEW Data, Fed on Tap

2011-09-20 05:55:00
Ilya Spivak, Sr. Currency Strategist
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Talking Points

  • Euro May Prove Unresponsive Unless German ZEW Surprises Higher
  • S&P 500 Index Futures Point to Continued Risk Aversion, Fed in Focus
  • US Dollar, Japanese Yen Rise as Asian Stocks Fall on Italy Downgrade
  • Aussie Dollar Spikes Higher as RBA Says Rate Hike Bets ‘Inaccurate’

The German ZEW Survey of investor confidence headlines the economic calendar in European hours, with expectations calling for sentiment to sour for the seventh consecutive month to record the weakest reading since December 2008. Importantly, the risks for the Euro are stacked on the upside considering a reading in line with or even somewhat worse than what is forecast would fall well within established trends, with only an upside surprise likely to prove significantly market-moving.

On the sentiment front, S&P 500 stock index futures are pointing substantially lower, hinting risk aversion is likely to carry over into the afternoon as Wall Street comes online. US Housing Starts amount to the only bit of scheduled economic data, but all eyes are likely to turn to the Federal Reserve as policymakers begin a two-day meeting amid hopes for another round of quantitative easing across financial markets.

The US Dollar and Japanese Yen outperformed in overnight trade, with traders turning to the currencies as safe havens amid another day of losses across Asian stock exchanges. The MSCI Asia Pacific regional equity index slumped over 1 percent after Standard and Poor’s cut Italy’s debt rating, compounding sovereign risk jitters that emerged at the beginning of the week in the aftermath of a fruitless EU finance ministers’ summit.

The Reserve Bank of Australia poured cold water on traders’ interest rate cut expectations with the release of minutes from its last policy meeting. While the central bank said the global economic outlook has become “significantly more clouded” and warned that near-term growth is likely to be “somewhat weaker” than expected as consumers remain cautious, it remains concerned about medium-term inflation and sees the overall outlook for the economy as broadly “positive”. Furthermore, policymakers acknowledged discussing the markets’ pricing in of rate cuts, saying inaccurate because of “technical factors”. The Australian Dollar spiked 0.4 percent higher as the report crossed the wires.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

1:30

AUD

Reserve Bank's Board September Minutes

-

-

-

5:00

JPY

Coincident Index (JUL F)

107.1

-

109.0

5:00

JPY

Leading Index (JUL F)

104.6

-

106.0

5:30

JPY

Nationwide Dept Store Sales (YoY) (AUG)

-1.7%

-

-0.1%

5:30

JPY

Tokyo Dept Store Sales (YoY) (AUG)

-2.9%

-

-1.3%

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

5:45

CHF

SECO September 2011 Economic Forecasts

-

-

Medium

6:00

EUR

German Producer Prices (MoM) (AUG)

0.0%

0.7%

Medium

6:00

EUR

German Producer Prices (YoY) (AUG)

5.8%

5.8%

Medium

6:00

CHF

Trade Balance (Swiss franc) (AUG)

-

2.81B

Medium

6:00

CHF

Exports (MoM) (AUG)

-

-3.0%

Low

6:00

CHF

Imports (MoM) (AUG)

-

0.1%

Low

8:00

EUR

Italian Industrial Orders sa (MoM) (JUL)

-1.5%

4.1%

Low

8:00

EUR

Italian Industrial Orders nsa (YoY) (JUL)

8.3%

13.6%

Low

8:00

EUR

Italian Industrial Sales sa (MoM) (JUL)

-

-1.7%

Low

8:00

EUR

Italian Industrial Sales nsa (YoY) (JUL)

-

10.8%

Low

9:00

EUR

Euro Zone ZEW Survey (Econ Sentiment) (SEP)

-

-40

Medium

9:00

EUR

German ZEW Survey (Curr Situation) (SEP)

45

53.5

Medium

9:00

EUR

German ZEW Survey (Econ Sentiment) (SEP)

-45

-37.6

High

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.3586

1.3786

GBPUSD

1.5626

1.5790

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

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