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Yen May See Greater Impact from Eurozone PMIs Than the Euro

Yen May See Greater Impact from Eurozone PMIs Than the Euro

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • Soft Eurozone PMI Data May Mean More for Risk Appetite Than the Euro
  • New Zealand Dollar Swooned as Soft CPI Data Sank RBNZ Rate Hike Bets
  • See Economic Releases Directly on Your Charts with the DailyFX News App

The preliminary set of October’s Eurozone PMI figures headlines the economic calendar in European hours. The region-wide composite reading is due to show the pace of manufacturing- and service-sector activity growth slowed for a third consecutive month, yielding the weakest results in 14 months. A soft print may carry greater implications for overall risk appetite than the Euro however.

The ECB seems resigned to complacency in the near term. Financial conditions in the region have deteriorated since mid-September even as the central bank introduced negative deposit rates and conducted its first TLTRO operation. Economic data outcomes swooned relative to expectations over the same period, pointing to trouble on the growth front. In response, ECB officials have counter-intuitively used public speaking opportunities to play down expectations for the upcoming asset purchase program.

On balance, this means that weak PMI readings are unlikely to be a strong negative catalyst for the single currency in as much as they probably won’t herald a forceful near-term response from Mario Draghi and company. Such results may amplify increasingly acute global slowdown fears however, fueling risk aversion and boosting demand for safety-linked assets like the Japanese Yen. We have entered short GBPJPY.

The New Zealand Dollar underperformed in overnight trade, dropping as much as 1.1 percent on average against its leading counterparts. The move tracked a slide in New Zealand bond yields as RBNZ interest rate hike bets unwound following a disappointing third-quarter CPI report. The headline year-on-year inflation rate unexpectedly dropped to 1 percent, the lowest in over a year.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

21:45

NZD

CPI (QoQ) (3Q)

0.3%

0.5%

0.3%

21:45

NZD

CPI (YoY) (3Q)

1.0%

1.2%

1.6%

0:30

AUD

NAB Business Confidence (3Q)

6

-

6

1:35

JPY

Markit/JMMA Mfg PMI (OCT P)

52.8

51.7

51.7

1:45

CNY

HSBC Mfg PMI (OCT P)

50.4

50.2

50.2

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

7:00

EUR

Markit France Mfg PMI (OCT P)

48.5

48.8

Medium

7:00

EUR

Markit France Services PMI (OCT P)

48.3

48.4

Medium

7:00

EUR

Markit France Comp PMI (OCT P)

48.7

48.4

Medium

7:30

EUR

Markit/BME Germany Mfg PMI (OCT P)

49.5

49.9

High

7:30

EUR

Markit/BME Germany Comp PMI (OCT P)

53.6

54.1

High

7:30

EUR

Markit Germany Services PMI (OCT P)

55.0

55.7

High

8:00

EUR

Markit Eurozone Comp PMI (OCT P)

51.5

52.0

High

8:00

EUR

Markit Eurozone Mfg PMI (OCT P)

49.9

50.3

High

8:00

EUR

Markit Eurozone Services PMI (OCT P)

52.0

52.4

High

8:30

GBP

Retail Sales ex Auto (MoM) (SEP)

0.0%

0.2%

Medium

8:30

GBP

Retail Sales ex Auto (YoY) (SEP)

3.4%

4.5%

Medium

8:30

GBP

Retail Sales Incl. Auto (MoM) (SEP)

-0.1%

0.4%

Medium

8:30

GBP

Retail Sales Incl. Auto (YoY) (SEP)

2.9%

3.9%

Medium

8:30

GBP

BBA Loans for House Purchase (SEP)

41450

41588

Low

9:00

EUR

Euro Area 2Q Government Debt

-

-

Low

10:00

GBP

CBI Trends Total Orders (OCT)

-3

-4

Low

10:00

GBP

CBI Trends Selling Prices (OCT)

0

1

Low

10:00

GBP

CBI Business Optimism (OCT)

15

19

Low

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EURUSD

1.2469

1.2572

1.2611

1.2675

1.2714

1.2778

1.2881

GBPUSD

1.5826

1.5945

1.5998

1.6064

1.6117

1.6183

1.6302

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

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