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Forex Analysis: Euro Vulnerable on CPI Print, Yen May Fall on US Data

Forex Analysis: Euro Vulnerable on CPI Print, Yen May Fall on US Data

2012-10-31 08:44:00
Ilya Spivak, Head Strategist, APAC
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The Euro may face selling pressure on swelling ECB rate hike bets as inflation hits a three month low. The Yen is vulnerable if US economic data boosts risk appetite.

Talking Points

  • Euro Vulnerable as CPI Slowdown Fuels ECB Interest Rate Cut Expectations
  • Eurozone Finance Ministers to Hold Conference Call on Greek Funding Woes
  • Dollar, Yen May Extend Losses as Chicago PMI Rebound Boosts Risk Appetite

The preliminary estimate of October’s Eurozone CPI reading headlines the economic calendar in European hours. Expectations call for the annual inflation rate to tick lower to 2.5 percent, marking the lowest print in three months. The outcome may weigh on the Euro as forex traders interpret fading price pressure as leaving the door open for the ECB to cut interest rates amid signs of deepening recession in the single currency area.

Separately, Euro-area finance ministers are set to hold a conference call on funding for Greece. Officials will discuss how to bridge the country’s funding needs and push its fiscal adjustment program back on track just two weeks before “troika” inspectors decide whether Athens’ progress on has been sufficient to allow the release of the next tranche of bailout cash. It is uncertain at this point whether any formal announcement will be made following the conversation.

Later in the day, the spotlight turns to the US data docket and the Chicago PMI report. Expectations call for an uptick to 51.0 in October after a disappointing 49.7 print in the prior month, putting the gauge back above the 50 “boom-bust” level. The result stands to reinforce the recent improvement in US economic data and could boost overall risk appetite, a scenario that is likely to put downward pressure on the safe-haven Japanese Yen and US Dollar.

The two anti-risk currencies already came under pressure overnight as Asian stocks pushed higher, sapping demand. The MSCI Asia Pacific regional benchmark equity index added 0.7 percent after a gauge of US home prices rose to the highest since September 2010. The release buoyed hopes that a firming recovery in the world’s largest economy will help support demand for Asian exporters.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

21:45

NZD

Building Permits (MoM) (SEP)

7.8%

3.0%

1.9%

23:15

JPY

Nomura/JMMA Manufacturing PMI (OCT)

46.9

-

48.0

0:01

GBP

GfK Consumer Confidence Survey (OCT)

-30

-28

-28

0:30

AUD

Building Approvals (MoM) (SEP)

7.8%

1.0%

8.8%

0:30

AUD

Building Approvals (YoY) (SEP)

12.4%

2.1%

-12.8%

0:30

AUD

Private Sector Credit (YoY) (SEP)

4.0%

3.9%

4.1%

0:30

AUD

Private Sector Credit (MoM) (SEP)

0.3%

0.2%

0.2%

1:30

JPY

Labor Cash Earnings (YoY) (SEP)

0.0%

-0.4%

0.0% (R-)

2:00

NZD

Money Supply M3 (YoY) (SEP)

6.4%

-

7.1% (R-)

5:00

JPY

Construction Orders (YoY) (SEP)

3.6%

-

8.7%

5:00

JPY

Housing Starts (YoY) (SEP)

15.5%

17.0%

-5.5%

5:00

JPY

Annualized Housing Starts (SEP)

0.866M

0.870M

0.888M

6:45

EUR

Leading Index (SEP)

100.49

-

99.81 (R+)

Euro Session: What to Expect

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

7:00

EUR

Germany Retail Sales (MoM) (SEP)

1.5% (A)

0.1%

Medium

7:00

EUR

Germany Retail Sales (YoY) (SEP)

-3.1% (A)

-0.8%

Medium

7:45

EUR

France Producer Prices (MoM) (SEP)

0.3% (A)

1.3%

Low

7:45

EUR

France Producer Prices (YoY) (SEP)

2.9% (A)

2.8%

Low

7:45

EUR

France Consumer Spending (MoM) (SEP)

0.1% (A)

-0.8%

Low

7:45

EUR

France Consumer Spending (YoY) (SEP)

-0.3% (A)

-0.5%

Low

9:00

EUR

Italy Unemployment Rate SA (SEP)

10.8%

10.7%

Low

10:00

EUR

Italy CPI (NIC incl. tobacco) (MoM) (OCT P)

0.3%

0.0%

Low

10:00

EUR

Italy CPI (NIC incl. tobacco) (YoY) (OCT P)

2.9%

3.2%

Low

10:00

EUR

Italy CPI - EU Harmonized (MoM) (OCT P)

0.6%

2.1%

Low

10:00

EUR

Italy CPI - EU Harmonized (YoY) (OCT P)

3.1%

3.4%

Low

10:00

EUR

Euro-Zone CPI Estimate (YoY) (OCT)

2.5%

2.7%

High

10:00

EUR

Euro-Zone Unemployment Rate (SEP)

11.4%

11.4%

Medium

11:00

EUR

Italy PPI (MoM) (SEP)

0.1%

0.8%

Low

11:00

EUR

Italy PPI (YoY) (SEP)

2.7%

3.0%

Low

12:30

EUR

Eurozone Finance Ministers Hold Call on Greece

-

-

Medium

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2902

1.3041

GBPUSD

1.6034

1.6190

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

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

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