Euro May Be More Responsive to Positive vs. Negative Inflation Data

2014-09-30 06:29:00

Ilya Spivak, Sr. Currency Strategist

Talking Points:

Euro to be More Sensitive to Positive vs. Negative Eurozone CPI Outcome
Aussie, NZ Dollars Rise Alongside S&P 500 Futures as Risk Aversion Fades
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The preliminary set of September’s Eurozone CPI figures headlines the economic calendar in European hours. The benchmark year-on-year inflation rate is expected to register at 0.3 percent, matching the five-year low recorded in the prior month.

While leading survey suggested that both selling prices and input costs weakened further in September, it ought to be noted that realized inflation-tracking data outcomes have notably improved relative to consensus forecasts since the beginning of the year (according to data from Citigroup). Though readings have tended to fall short of expectations, the margin of disappointment has steadily narrowed since January.

This suggests that the markets may be nearing a point where forecasters are sufficiently acclimated to the extent of Eurozone disinflation. In such an environment, the ability of soft price-growth figures to underperform and thereby inspire Euro selling pressure is diminished. The aggressive build in speculative net-short EUR exposure and the already realized arrival of a significant ECB stimulus effort compounds this.

On balance, this means that the single currency may prove relatively unresponsive to an in-line or even somewhat softer CPI print. On the contrary, a better-than-expected read could trigger liquidation of Euro shorts, fueling a swift corrective bounce.

The Australian and New Zealand Dollars outperformed in overnight trade, rising as much as 0.3 and 0.7 percent respectively against their leading counterparts. The move tracked an overnight advance in S&P 500 index futures, hinting a recovery in risk appetite following the shakeout at the start of the trading week was the catalyst behind price action.

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Asia Session

GMT	CCY	EVENT	ACT	EXP	PREV
21:45	NZD	Building Permits (MoM) (AUG)	0.0%	0.0%	-1.7%
23:05	GBP	GfK Consumer Confidence Survey (SEP)	-1	0	1
23:30	AUD	ANZ Roy Morgan Weekly Consumer Conf	113.7	-	112.9
23:30	JPY	Jobless Rate (AUG)	3.5%	3.8%	3.8%
23:30	JPY	Job-to-Applicant Ratio (AUG)	1.1	1.1	1.1
23:30	JPY	Household Spending (YoY) (AUG)	-4.7%	-3.6%	-5.9%
23:50	JPY	Retail Trade s.a. (MoM) (AUG)	1.9%	0.5%	-0.5%
23:50	JPY	Retail Trade (YoY) (AUG)	1.2%	0.1%	0.6%
23:50	JPY	Large Retailers' Sales (AUG)	1.6%	0.0%	-0.6%
23:50	JPY	Industrial Production (MoM) (AUG P)	-1.5%	0.2%	0.4%
23:50	JPY	Industrial Production (YoY) (AUG P)	-2.9%	-1.1%	-0.7%
23:50	JPY	Retail Sales s.a. (MoM)	1.9%	0.5%	-0.5%
0:00	NZD	ANZ Activity Outlook (SEP)	37.0	-	36.6
0:00	NZD	ANZ Business Confidence (SEP)	13.4	-	24.4
1:30	AUD	Private Sector Credit (MoM) (AUG)	0.4%	0.5%	0.4%
1:30	AUD	Private Sector Credit (YoY) (AUG)	5.1%	5.2%	5.1%
1:30	JPY	Labor Cash Earnings (YoY) (AUG)	1.4%	0.9%	2.4%
1:31	CNY	Leading Index (AUG)	100.09	-	100.20
1:45	CNY	HSBC China Manufacturing PMI (SEP F)	50.2	50.5	50.5
2:00	NZD	Money Supply M3 (YoY) (AUG)	5.2%	-	5.3%
4:00	JPY	Vehicle Production (YoY) (AUG)	-6.7%	-	-1.7%
5:00	JPY	Small Business Confidence (SEP)	47.6	-	47.7
5:00	JPY	Housing Starts (YoY) (AUG)	-12.5%	-14.2%	-14.1%
5:00	JPY	Annualized Housing Starts (AUG)	0.845M	0.837M	0.839M
5:00	JPY	Construction Orders (YoY) (AUG)	8.6%	-	24.4%

European Session

GMT	CCY	EVENT	EXP/ACT	PREV	IMPACT
6:00	EUR	German Retail Sales (YoY) (AUG)	0.1% (A)	1.0%	Medium
6:00	EUR	German Retail Sales (MoM) (AUG)	2.5% (A)	-1.1%	Medium
6:00	GBP	Nationwide House Prices s.a. (MoM) (SEP)	-0.2% (A)	0.8%	Low
6:00	GBP	Nationwide House Prices n.s.a. (YoY) (SEP)	9.4% (A)	11.0%	Low
7:00	CHF	KOF Leading Indicator (SEP)	99.0	99.5	Low
7:55	EUR	German Unemployment Change (SEP)	-2K	2K	Medium
7:55	EUR	German Unemployment Rate s.a. (SEP)	6.7%	6.7%	Medium
8:00	EUR	Italian Unemployment Rate (AUG P)	12.6%	12.6%	Low
8:30	GBP	GDP (QoQ) (2Q F)	0.8%	0.8%	Medium
8:30	GBP	GDP (YoY) (2Q F)	3.2%	3.2%	Medium
8:30	GBP	Current Account (£) (2Q)	-18.0B	-18.5B	Low
8:30	GBP	Total Business Investment (QoQ) (2Q F)	-	5.0%	Low
8:30	GBP	Total Business Investment (YoY) (2Q F)	-	10.6%	Low
8:30	GBP	Index of Services (MoM) (JUL)	0.3%	0.3%	Low
8:30	GBP	Index of Services (3M/3M) (JUL)	1.0%	1.0%	Low
8:30	GBP	Lloyds Business Barometer (SEP)	-	47	Low
9:00	EUR	Eurozone Unemployment Rate (AUG)	11.5%	11.5%	Medium
9:00	EUR	Eurozone CPI Estimate (YoY) (SEP)	0.3%	0.4%	High
9:00	EUR	Eurozone CPI - Core (YoY) (SEP A)	0.9%	0.9%	High