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Forex: Euro at Risk of Deeper Losses if CPI Data Drives ECB Easing Bets

Forex: Euro at Risk of Deeper Losses if CPI Data Drives ECB Easing Bets

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • Euro May See Added Selling Pressure if Eurozone CPI Falls Short of Forecasts
  • US Dollar Looks Toward Pickup in UofM Consumer Confidence to Fuel Gains
  • Yen Gains, Commodity Dollars Decline as Risk Aversion Sweeps Asian Markets

The preliminary set of January’s Eurozone CPI figures headlines the economic calendar in European hours. Expectations call for the headline year-on-year inflation rate to rise to 0.9 percent, reversing the drop to 0.8 percent recorded in December to match November’s print.

The analogous report from Germany disappointed as expected yesterday, driving the Euro lower amid speculation about a forthcoming expansion of ECB stimulus efforts. More of the same seems likely this time around. Indeed, the latest set of leading PMI data continued to stress that “deflationary forces are clearly a concernin many [Euro area] countries.” We remain short EURUSD.

Later in the day, the spotlight turns to the final revision of January’sUniversity of Michigan gauge of US Consumer Confidence. An upward revision is expected, which may help support Treasury yields as well as the US Dollar as traders look ahead to continued tapering of the Fed’s QE asset purchases. The analogous report from the Conference Board produced a better-than-expected sentiment reading earlier in the week, bolstering the case for an upbeat outcome.

The Japanese Yen outperformed on the back of safe-haven capital inflows while the sentiment-geared Australian, Canadian and New Zealand Dollars faced outsized selling pressure as risk aversion gripped financial markets in overnight trade. The MSCI Asia Pacific regional benchmark stock index fell 1.5 percent.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

21:45

NZD

Trade Balance (NZ$) (DEC)

523M

500M

183M

21:45

NZD

Exports (NZ$) (DEC)

4.76B

4.60B

4.48B

21:45

NZD

Imports (NZ$) (DEC)

4.24B

4.00B

4.29B

21:45

NZD

Trade Balance YTD (NZ$) (DEC)

-259M

-383M

-248M

23:30

JPY

Household Spending (YoY) (DEC)

0.7%

1.1%

0.2%

23:30

JPY

Jobless Rate (DEC)

3.7%

3.9%

4.0%

23:30

JPY

Job-To-Applicant Ratio (DEC)

1.03

1.01

1.00

23:30

JPY

National CPI (YoY) (DEC)

1.6%

1.5%

1.5%

23:30

JPY

National CPI Ex-Fresh Food (YoY) (DEC)

1.3%

1.2%

1.2%

23:30

JPY

National CPI Ex Food, Energy (YoY) (DEC)

0.7%

0.7%

0.6%

23:30

JPY

Tokyo CPI (YoY) (JAN)

0.7%

0.8%

0.9%

23:30

JPY

Tokyo CPI Ex-Fresh Food (YoY) (JAN)

0.7%

0.7%

0.7%

23:30

JPY

Tokyo CPI Ex Food, Energy (YoY) (JAN)

0.3%

0.4%

0.3%

23:50

JPY

Industrial Production (MoM) (DEC P)

1.1%

1.3%

-0.1%

23:50

JPY

Industrial Production (YoY) (DEC P)

7.3%

7.3%

4.8%

0:05

GBP

GfK Consumer Confidence Survey (JAN)

-7

-12

-13

0:30

AUD

Private Sector Credit (MoM) (DEC)

0.5%

0.4%

0.3%

0:30

AUD

Private Sector Credit (YoY) (DEC)

3.9%

3.7%

3.8%

0:30

AUD

PPI (QoQ) (4Q)

0.2%

-

1.3%

0:30

AUD

PPI (YoY) (4Q)

1.9%

-

1.9%

2:00

NZD

Money Supply M3 (YoY) (DEC)

5.8%

-

6.7%

4:00

JPY

Vehicle Production (YoY) (DEC)

12.2%

-

10.2%

5:00

JPY

Housing Starts (YoY) (DEC)

18.0%

13.6%

14.1%

5:00

JPY

Annualized Housing Starts (DEC)

1.055M

1.000M

1.037M

5:00

JPY

Construction Orders (YoY) (DEC)

4.9%

-

2.2%

European Session

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

7:00

EUR

German Retail Sales (YoY) (DEC)

1.9%

1.1%

Medium

7:00

EUR

German Retail Sales (MoM) (DEC)

0.2%

0.8%

Medium

9:00

EUR

Italian Unemployment Rate (DEC P)

12.7%

12.7%

Low

9:30

GBP

Lloyds Business Barometer

-

48

Low

10:00

EUR

Euro-Zone CPI Estimate (YoY) (JAN)

0.9%

0.8%

High

10:00

EUR

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

0.9%

0.7%

High

10:00

EUR

Euro-Zone Unemployment Rate (DEC)

12.1%

12.1%

Medium

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EUR/USD

1.3344

1.3466

1.3510

1.3588

1.3632

1.3710

1.3832

GBP/USD

1.6253

1.6376

1.6430

1.6499

1.6553

1.6622

1.6745

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

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