Forex Analysis: Euro at Risk on German Jobs Data, Yen Higher on BOJ

2012-10-30 08:19:00 Ilya Spivak, Head Strategist, APAC

The Euro may fall as another rise in German unemployment stokes ECB rate cut expectations. The Yen rose as the BOJ proved modest in expanding stimulus.

Talking Points

Euro May Fall as German Unemployment Gain Boosts ECB Rate Cut Bets
Japanese Yen Higher in Asia as BOJ Stimulus Boost Meets Expectations

German Unemployment figures headline the economic calendar in European hours. Expectations call for the economy to shed 10,000 jobs in October, pushing the unemployment rate higher to 6.9 percent. Job losses have been steadily mounting in the Eurozone’s largest economy, with the ranks of the unemployed rising for six consecutive months for a cumulative 54,000 increase over the second and third quarters. Another push the same direction may reinforce signs of deepening weakness seen in last week’s dismal PMI readings, stoking ECB rate cut expectations and weighing on the Euro.

The Japanese Yen outperformed in overnight trade after the Bank of Japan announced an expansion of stimulus measures that fell on the low end of forex traders’ expectations. Policymakers expanded asset purchases by ¥11 trillion. Reports circling the wires before the announcement called for as much as a ¥20 trillion expansion. The currency’s gains may prove fleeting however considering the BOJ also forecast that inflation would come in below its 1 percent target through the 2014 fiscal year, meaning additional efforts to loosen monetary policy are likely on the horizon.

Asia Session: What Happened

GMT	CCY	EVENT	ACT	EXP	PREV
23:30	JPY	Jobless Rate (SEP)	4.2%	4.2%	4.2%
23:30	JPY	Job-To-Applicant Ratio (SEP)	0.81	0.83	0.83
23:30	JPY	Household Spending (YoY) (SEP)	-0.9%	0.80%	1.8%
23:50	JPY	Industrial Production (YoY) (SEP P)	-8.1%	-7.1%	-4.6%
23:50	JPY	Industrial Production (MoM) (SEP P)	-4.1%	-3.1%	-1.6%
0:00	AUD	HIA New Home Sales (MoM) (SEP)	-3.7%	-	-5.3%
4:00	JPY	Vehicle Production (YoY) (SEP)	-12.4%	-	4.5%
5:49	JPY	Bank of Japan Rate Decision	0.10%	0.10%	0.10%

Euro Session: What to Expect

GMT	CCY	EVENT	EXP/ACT	PREV	IMPACT
7:00	CHF	UBS Consumption Indicator (SEP)	1.07 (A)	1.02	Low
8:00	EUR	Spain GDP (QoQ)	-0.4%	-0.4%	Medium
8:00	EUR	Spain GDP (YoY)	-1.7%	-1.3%	Medium
8:00	EUR	ECB President Draghi Speaks in Frankfurt	-	-	Medium
8:55	EUR	German Unemployment Rate (OCT)	6.9%	6.8%	High
8:55	EUR	German Unemployment Change (OCT)	10K	9K	High
10:00	EUR	Euro-Zone Business Climate Indicator (OCT)	-1.42	-1.34	Low
10:00	EUR	Euro-Zone Consumer Confidence (OCT F)	-25.6	-25.6	Medium
10:00	EUR	Euro-Zone Services Confidence (OCT)	-13	-12	Low
10:00	EUR	Euro-Zone Economic Confidence (OCT)	84.5	85	Low
10:00	EUR	Euro-Zone Industrial Confidence (OCT)	-17	-16.1	Low
10:00	EUR	Italy to Sell €7B in 5- and 10-year Bonds	-	-	Medium
11:00	GBP	CBI Reported Sales (OCT)	8	6	Low