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FOREX: Dollar, Yen Sold as Risk Appetite Firms on ECB LTRO Hopes

FOREX: Dollar, Yen Sold as Risk Appetite Firms on ECB LTRO Hopes

Ilya Spivak, Head Strategist, APAC

Talking Points

  • Dollar, Yen Sell Off as Risk Appetite Firms Ahead of ECB LTRO Outcome
  • Euro Likely to Look Past German CPI Data as Inflation Rate Holds Steady

The US Dollar and Japanese Yen declined against most of their leading counterparts in overnight as Asian stocks rose, sapping demand for the go-to safe haven currencies. Risk appetite is on the upswing as traders look ahead to the outcome of the second 3-year ECB long-term refinancing operation (LTRO). Median forecasts call for a take-up of €470 billion this time around after a €489 billion outing in December. As discussed in detail in our weekly fundamental trends monitor, such an outcome is likely to downgrade the threat of a Eurozone-driven credit crunch in the eyes of investors, boosting market-wide sentiment. The final LTRO results are due to be announced tomorrow.

S&P 500 stock index futures are trading higher in early European trade, hinting the risk-on mood is likely to continue to boost risk-linked currencies against the greenback and the Yen. On the data front, the focus is on February’s preliminary German Consumer Price Index reading. Expectations suggest the annual inflation rate will remain unchanged at 2.1 percent for the third consecutive month, a likely neutral outcome for the Euro. Indeed, priced-in expectations already call for a flat ECB outlook in the coming 12 months, so confirmation of the status quo is unlikely to mean much for the single currency particularly as LTRO preoccupies traders’ attention.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

23:50

JPY

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

4.1%

1.0%

0.3%

23:50

JPY

Retail Trade (YoY) (JAN)

1.9%

-0.1%

2.5%

23:50

JPY

Large Retailers' Sales (JAN)

-1.0%

-1.1%

-0.3% (R-)

5:00

JPY

Small Business Confidence (FEB)

45.3

-

45.7

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

7:00

EUR

German GfK Consumer Confidence Survey (MAR)

6.0

5.9

Medium

7:00

CHF

UBS Consumption Indicator (JAN)

-

0.92

Medium

10:00

EUR

Euro-Zone Business Climate Indicator (FEB)

-0.15

-0.21

Low

10:00

EUR

Euro-Zone Consumer Confidence (FEB F)

-20.2

-20.2

Medium

10:00

EUR

Euro-Zone Economic Confidence (FEB)

94

93.4

Low

10:00

EUR

Euro-Zone Industrial Confidence (FEB)

-7

-7.2

Low

10:00

EUR

Euro-Zone Services Confidence (FEB)

-0.6

-0.6

Low

11:00

GBP

CBI Reported Sales (FEB)

-12

-22

Low

13:00

EUR

German CPI (MoM) (FEB P)

0.5%

-0.4%

Medium

13:00

EUR

German CPI (YoY) (FEB P)

2.1%

2.1%

High

13:00

EUR

German CPI - EU Harmonised (MoM) (FEB P)

0.5%

-0.5%

Medium

13:00

EUR

German CPI - EU Harmonised (YoY) (FEB P)

2.2%

2.3%

High

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.3350

1.3528

GBPUSD

1.5789

1.5937

--- 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

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

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