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FOREX: Euro Needs Upside Surprise to Move on German IFO Data

FOREX: Euro Needs Upside Surprise to Move on German IFO Data

2011-12-20 05:09:00
Ilya Spivak, Sr. Currency Strategist
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Talking Points

  • Aussie, NZ Dollars Follow Asian Stocks Higher on Regional Growth Bets
  • German IFO Survey Impact Likely Muted Absent Major Upside Surprise
  • S&P 500 Index Futures Point to US Dollar Weakness Amid Risk Recovery

The Australian and New Zealand Dollars outperformed overnight, following regional stock exchanges higher. The MSCI Asia Pacific regional benchmark equity index added 0.5 percent after Richmond Federal Reserve President Jeff Lacker called the recent stream of domestic economic data “positive”, adding that he is “hard-pressed to see the need for further stimulus” while minutes from December’s Reserve Bank of Australia policy meeting showed the bank expected “solid” Asian growth and a “more positive tone” in the US. Supportive commentary from one of Asian economies’ top export markets (the US) as well as one of its leading raw-materials suppliers (Australia) stocked confidence in regional growth, driving a recovery in sentiment-sensitive assets.

Looking ahead, the German IFO Survey of business confidence tops the economic calendar. The headline Business Climate gauge is expected to drop to the lowest in 21 months in December after a shallow bounce in the previous month snapped four consecutive months of losses. The forward-looking Expectations component is forecast to hit the weakest since July 2009. While hardly supportive, continued deterioration in the economic outlook for the Eurozone’s top economy is hardly surprising. Indeed, economists’ consensus region-wide 2012 GDP growth expectations have been aggressively tumbling since late August. This means the outcome will offer little that has not been priced in already and so may only prove significantly market-moving in the event of a substantial positive surprise.

Elsewhere on the docket, Greece and Spain are scheduled to hold bond auctions selling 91- and 182-day paper, with traders keeping an eye on bid-to-cover ratios (a measure of demand) and prevailing yields to gauge near-term Eurozone debt crisis fears. Needless to say, poor uptake or a spike in borrowing costs bode ill for the Euro. The short tenor of the debt on offer and the increasingly acute focus on contagion to the currency bloc’s AAA-rated sovereigns – notably France – may yield an underwhelming response from price action. Thinning liquidity ahead of the Christmas / New Year holiday period celebrated in most of the world’s top financial centers bolsters the case for muted trade absent truly game-changing developments. S&P 500 stock index futures are ticking higher, hinting sentiment-sensitive currencies have scope to recover against the safe-haven US Dollar amid a broad-based correction in risk appetite.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

23:00

AUD

Conference Board Leading Index (OCT)

0.6%

-

0.6% (R+)

0:01

GBP

Nationwide Consumer Confidence (NOV)

40

36

36

0:30

AUD

RBA December Meeting Minutes

-

-

-

4:30

JPY

All Industry Activity Index (MoM) (OCT)

0.8%

1.0%

-0.7% (R+)

5:00

JPY

Leading Index (OCT F)

92.0

-

91.5

5:00

JPY

Coincident Index (OCT F)

91.4

-

90.3

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

7:00

EUR

German GfK Consumer Confidence Survey (NOV)

5.5

5.6

Low

7:00

EUR

German Producer Prices (YoY) (NOV)

5.2%

5.3%

Medium

7:00

EUR

German Producer Prices (MoM) (NOV)

0.1%

0.2%

Medium

7:00

JPY

Convenience Store Sales (YoY) (NOV)

-

14.1%

Low

7:00

CHF

Trade Balance (CHF) (NOV)

2.00B

2.16B

Low

7:00

CHF

Exports (MoM) (NOV)

-

1.3%

Low

7:00

CHF

Imports (MoM) (NOV)

-

1.4%

Low

9:00

EUR

German IFO - Business Climate (DEC)

106.0

106.6

High

9:00

EUR

German IFO - Current Assessment (DEC)

116.0

116.7

High

9:00

EUR

German IFO – Expectations (DEC)

97.0

97.3

High

9:00

EUR

Italian Industrial Orders s.a. (MoM) (OCT)

-1.3%

-8.3%

Low

9:00

EUR

Italian Industrial Orders n.s.a. (YoY) (OCT)

-1.2%

-3.6%

Low

9:00

EUR

Italian Industrial Sales s.a. (MoM) (OCT)

-

-5.4%

Low

9:00

EUR

Italian Industrial Sales n.s.a. (YoY) (OCT)

-

1.9%

Low

9:30

EUR

Spain to Sell 91- and 182-day Bills

-

-

Medium

10:00

EUR

Greece to Sell €1bn in 91-day Bills

-

-

Medium

11:00

GBP

CBI Reported Sales (DEC)

-12

-19

Medium

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2971

1.3039

GBPUSD

1.5460

1.5586

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

To contact Ilya, e-mail ispivak@dailyfx.com. Follow me on Twitter at @IlyaSpivak

To be added to Ilya's e-mail distribution list, send a note with subject line "Distribution List" to ispivak@dailyfx.com

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