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Forex: Euro at Risk as Dovish Commentary Stokes Easing Speculation

Forex: Euro at Risk as Dovish Commentary Stokes Easing Speculation

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • Franc Likely to Look Past Trade Figures, Euro at Risk on Dovish Commentary
  • US Dollar Looking to Consumer Confidence, Durables Data to Drive Recovery
  • Aussie and NZ Dollars Advanced on Firming Risk Appetite in Overnight Trade

The economic calendar remains quiet in European hours, with Swiss Trade Balance figures amounting to the only bit of noteworthy event risk on the docket. The trade surplus is expected to edge to CHF2.1 billion in April, marking a hairline improvement over the prior month. The release probably won’t meaningful direction cues to the Swiss Franc considering its limited implications for SNB monetary policy. Indeed, with the central bank forecasting inflation below 1 percent through 2015, Thomas Jordan and company seem unlikely to step away from an ultra-accommodative policy regime for some time yet.

Elsewhere, traders will continue to watch sideline commentary from the ECB Conference on Central Banks going into its third day in Sintra, Portugal. Policymakers have gathered to discuss ways to address the lingering disinflation problem in the Eurozone with an eye to potentially introduce an expanded stimulus effort as soon as next week. Dovish rhetoric from the summit has failed to apply downward pressure on the Euro thus far but that can swiftly change if vague pronouncements about the severity of the situation are replaced with actionable policy prescriptions. We remain short EURUSD.

The spotlight turns to US data later in the day, with April’s Durable Goods Orders report and May’s Consumer Confidence reading on the docket. US economic news-flow has increasingly improved relative to expectations in early April, suggesting analysts are underestimating the economy’s resilience and opening the door for upside surprises. Such outcomesare likely to help scatter doubts about continued “tapering” of QE asset purchases, stoking speculation about subsequent interest rate hikes and boosting the US Dollar.

The Australian and New Zealand Dollars outperformed in overnight trade, rising as much as 0.2 percent apiece against their leading counterparts. The moves tracked a move higher in S&P 500 futures, pointing to a swell risk appetite as the catalyst behind the advance in the sentiment-geared currencies. The greenback turned broadly lower in what appeared to be a corrective pullback following last week’s impressive gains that brought the benchmark currency to a two-month high.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

23:50

JPY

Corporate Service Price (YoY) (APR)

3.4%

3.2%

0.7%

5:00

JPY

Small Business Confidence (MAY)

-

45.4

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

6:00

CHF

Trade Balance (CHF) (APR)

2.10B

2.05B

Low

6:00

CHF

Exports (MoM) (APR)

-

-1.2%

Low

6:00

CHF

Imports (MoM) (APR)

-

-4.5%

Low

8:30

GBP

BBA Loans for House Purchase (APR)

45100

45933

Low

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EUR/USD

1.3559

1.3599

1.3622

1.3639

1.3662

1.3679

1.3719

GBP/USD

1.6773

1.6806

1.6824

1.6839

1.6857

1.6872

1.6905

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

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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