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FOREX: Euro May Fall as Aussie Gains vs. Dollar on Strong ECB LTRO

FOREX: Euro May Fall as Aussie Gains vs. Dollar on Strong ECB LTRO

2012-02-29 08:05:00
Ilya Spivak, Head Strategist, APAC
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Talking Points

  • Dollar, Yen Fall Amid Optimism Ahead of ECB LTRO Results
  • Strong LTRO Outlook May Weigh on Euro, Boost Aussie and Kiwi
  • Eurozone CPI, German Jobs Data Unlikely to be Market-Moving

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. This seems to bode well for the stocks-correlated Australian, Canadian and New Zealand Dollars. It may prove to hurt the Euro however in a similar way that money supply dilution courtesy of the Fed’s QE efforts weighed on the greenback. The final LTRO results are due at 10:15 GMT.

On the data front, German Unemployment figures enter the spotlight first. Expectations expect the economy to add 5,000 jobs in February, keeping the unemployment rate unchanged at 6.7 percent. Later in the day, the Eurozone CPI report is expected to show that the region-wide inflation rate held at 2.7 percent for second month in January.

On balance, neither outcome is likely to prove particularly market-moving. A steady improvement in German labor-market conditions since early 2009 has had no discernible impact on ECB policy expectations, eclipsed by weakness elsewhere in the region. As for the CPI reading, 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

21:45

NZD

Building Permits (MoM) (JAN)

8.3%

3.4%

2.6% (R+)

23:15

JPY

Markit/JMMA Manufacturing PMI (FEB)

50.5

-

50.7

23:50

JPY

Industrial Production (MoM) (JAN P)

2.0%

1.5%

3.8%

23:50

JPY

Industrial Production (YoY) (JAN P)

-1.2%

-1.6%

-4.3%

0:00

AUD

HIA New Home Sales (MoM) (JAN)

-7.3%

-

-4.9%

0:00

NZD

NBNZ Activity Outlook (FEB)

31.2

-

25.7

0:00

NZD

NBNZ Business Confidence (FEB)

28.0

-

16.9

0:01

GBP

GfK Consumer Confidence Survey (FEB)

-29

-27

-29

0:30

AUD

Construction Work Done (4Q)

-4.6%

-0.8%

11.7% (R-)

0:30

AUD

Private Sector Credit (MoM) (JAN)

0.2%

0.3%

0.3%

0:30

AUD

Private Sector Credit (YoY) (JAN)

3.5%

3.6%

3.5%

0:30

AUD

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

0.3%

0.3%

-0.1%

2:00

NZD

Money Supply M3 (YoY) (JAN)

5.4%

-

6.0%

4:00

JPY

Vehicle Production (YoY) (JAN)

18.6%

-

13.4%

5:00

JPY

Construction Orders (YoY) (JAN)

24.6%

-

1.5%

5:00

JPY

Annualized Housing Starts (JAN)

0.822M

0.808M

0.783M

5:00

JPY

Housing Starts (YoY) (JAN)

-1.1%

-3.3%

-7.3%

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

7:00

EUR

German Import Price Index (MoM) (JAN)

0.7%

0.3%

Low

7:00

EUR

German Import Price Index (YoY) (JAN)

3.0%

3.9%

Low

7:45

EUR

French Consumer Spending (MoM) (JAN)

0.2%

-0.7%

Low

7:45

EUR

French Consumer Spending (YoY) (JAN)

-2.0%

-3.1%

Low

8:00

CHF

KOF Swiss Leading Indicator (FEB)

-0.10

-0.17

Medium

8:55

EUR

German Unemployment Change (FEB)

-5K

-34K

High

8:55

EUR

German Unemployment Rate s.a. (FEB)

6.7%

6.7%

Medium

9:30

GBP

Net Consumer Credit (JAN)

0.2B

-0.4B

Medium

9:30

GBP

Net Lending Sec. on Dwellings (JAN)

0.8B

0.7B

Medium

9:30

GBP

Mortgage Approvals (JAN) (JAN)

54.0K

52.9K

Medium

9:30

GBP

M4 Money Supply (MoM) (JAN)

-

-1.4%

Low

9:30

GBP

M4 Money Supply (YoY) (JAN)

-

-2.5%

Low

9:30

GBP

M4 Ex IOFCs 3M Annualised (JAN)

-

-0.8%

Low

10:00

EUR

Euro-Zone CPI - Core (YoY) (JAN)

1.7%

1.6%

Low

10:00

EUR

Euro-Zone CPI (MoM) (JAN)

-0.8%

0.3%

Medium

10:00

EUR

Euro-Zone CPI (YoY) (JAN)

2.7%

2.7%

High

10:00

CHF

CPI - EU Harmonized (MoM) (JAN)

-0.3%

0.3%

Low

10:00

CHF

CPI - EU Harmonized (YoY) (JAN)

-0.7%

-0.4%

Low

10:15

EUR

ECB LTRO 3-Year Allotment Announcement

-

-

High

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.3407

1.3521

GBPUSD

1.5831

1.5978

--- 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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