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Forex Analysis: Euro May Weaken as ECB Outlook Boosts Rate Cut Bets

Forex Analysis: Euro May Weaken as ECB Outlook Boosts Rate Cut Bets

2012-12-06 09:17:00
Ilya Spivak, Head Strategist, APAC
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The Euro may weaken as the ECB unveils an updated set of economic projections, with sharp downside revisions likely to drive expectations for further stimulus.

Talking Points

  • Euro May Weaken if ECB Growth Projections Boost Rate Cut Outlook
  • BOE Monetary Policy Announcement Likely to be Another Non-Event
  • Aussie Gains on Jobs Data, Kiwi Up on Hawkish Cues in RBNZ Rhetoric

The monetary policy announcements from the European Central Bank and the Bank of England headline the economic calendar in European hours. The BOE’s latest quarterly Inflation report suggests the bank is firmly in wait-and-see mode for the time being. The ECB is likewise expected to maintain the current monetary policy setting, but President Mario Draghi’s press conference following the announcement may produce some fireworks.

Euro-area economic data has performed marginally better relative to expectations since November’s rate decision, so the ECB is unlikely to feel an acute urgency to ease before year-end. With that in mind, an updated set of economic projections for the region to be unveiled at Draghi’s presser may weigh on the Euro in the event that particularly sharp downgrades see forex traders begin to build expectations for looser policy in early 2013.

The Australian and New Zealand Dollars outperformed in overnight trade. The Aussie edged higher after November’s Employment report showed the economy unexpectedly added 13,900 jobs while the unemployment rate dropped to 5.2 percent. Meanwhile, the Kiwi was buoyed by a clear hawkish shift in RBNZ rhetoric. Most critically, Governor Graeme Wheeler noted that the bank will “watch for a greater degree of inflation pressure than is assumed” as Canterbury reconstruction-driven investment picks up.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

20:00

NZD

Reserve Bank of New Zealand Rate Decision

2.50%

2.50%

2.50%

0:30

AUD

Employment Change (NOV)

13.9K

0.0K

10.2K

0:30

AUD

Unemployment Rate (NOV)

5.2%

5.5%

5.4%

0:30

AUD

Full Time Employment Change (NOV)

-4.2K

-

17.6K

0:30

AUD

Part Time Employment Change (NOV)

18.1K

-

-7.4K

0:30

AUD

Participation Rate (NOV)

65.1%

65.1%

65.2%

2:00

JPY

Tokyo Average Office Vacancies (%) (NOV)

8.76

-

8.74

Euro Session: What to Expect

GMT

CCY

EVENT

ACT/EXP

PREV

IMPACT

6:45

CHF

Unemployment Rate (NOV)

3.1% (A)

2.9%

Medium

6:45

CHF

Unemployment Rate s.a. (NOV)

3.0% (A)

3.0%

Medium

8:15

CHF

Consumer Price Index (MoM) (NOV)

-0.3% (A)

0.1%

Medium

8:15

CHF

Consumer Price Index (YoY) (NOV)

-0.4% (A)

-0.2%

Medium

9:30

GBP

Visible Trade Balance (£) (OCT)

-8650

-8368

Medium

9:30

GBP

Trade Balance Non EU (£) (OCT)

-4200

-3972

Low

9:30

GBP

Total Trade Balance (£) (OCT)

-3000

-2699

Low

10:00

EUR

Euro-zone GDP s.a. (QoQ) (3Q P)

-0.1%

-0.1%

Medium

10:00

EUR

Euro-zone GDP s.a. (YoY) (3Q P)

-0.6%

-0.6%

Medium

10:00

EUR

Euro-zone Household Consumption (QoQ) (3Q P)

-0.2%

-0.4%

Low

10:00

EUR

Euro-zone Gross Fixed Capital (QoQ) (3Q P)

-0.8%

-1.5%

Low

10:00

EUR

Euro-zone Government Expenditure (QoQ) (3Q P)

0.0%

0.0%

Low

11:00

EUR

German Factory Orders s.a. (MoM) (OCT)

1.0%

-3.3%

Medium

11:00

EUR

German Factory Orders n.s.a. (YoY) (OCT)

-5.6%

-4.7%

Medium

12:00

GBP

Bank of England Rate Decision (DEC 6)

0.50%

0.50%

High

12:00

GBP

BoE Asset Purchase Target (DEC)

375B

375B

High

12:45

EUR

European Central Bank Rate Decision (DEC 6)

0.75%

0.75%

High

12:45

EUR

ECB Deposit Facility Rate (DEC 6)

0.00%

0.00%

Medium

13:30

EUR

ECB’s Draghi Holds Press Conference

-

-

High

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.3043

1.3110

GBPUSD

1.6080

1.6136

--- 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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