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Euro May Fall if 3Q GDP Data Bolsters the Case for More ECB Stimulus

Euro May Fall if 3Q GDP Data Bolsters the Case for More ECB Stimulus

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • Euro May Decline if 3Q GDP Helps Build a Case for “Sovereign” ECB QE
  • US Dollar Looks to Retail Sales, UofM Data to Inform Fed Rate Hike Bets
  • See Economic Releases Directly on Your Charts with the DailyFX News App

The preliminary set of third-quarter Eurozone GDP figures headlines the economic calendar in European trading hours. The region-wide metric is expected to show output grew 0.1 percent in the three months through September, matching the second quarter outcome. The year-on-year growth rate is seen dipping to 0.7 percent, marking the third consecutive downtick.

At first blush, it would appear that the release may pass with little fanfare regardless of the outcome considering its limited impact on near-term ECB monetary policy. Indeed, Mario Draghi and company have already unveiled a diverse medley of easing measures this year, some of which have yet to be implemented. Policymakers will no doubt want to assess those efforts’ impact before additional steps are undertaken.

With that said, the central bank can surely imagine the possibility that its actions may prove insufficient and will want to at least set the stage for “sovereign QE” if it proves necessary. A number of key member states (most notably Germany) oppose this but may be swayed in the face of overwhelming evidence. To that end, a particularly weak GDP print may be seen as building a case for more accommodation in 2015, weighing on the Euro. We remain short EURUSD.

Later in the day, the spotlight shifts to the US data docket, where October’s Retail Sales report and preliminary estimate of November’s University of Michigan Consumer Confidence gauge are due to cross the wires. Receipts are seen adding 0.2 percent after falling 0.3 percent in September. Sentiment is forecast to climb to the highest level since July 2007. Rosy outcomes are may feed speculation of a sooner-than-expected Fed rate increase, boosting the US Dollar (and vice versa).

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

2:00

NZD

Non Resident Bond Holdings (OCT)

64.8%

-

65.9%

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

6:30

EUR

French GDP (QoQ) (3Q P)

0.1%

0.0%

Medium

6:30

EUR

French GDP (YoY) (3Q P)

0.4%

0.1%

Medium

7:00

EUR

German GDP (QoQ) (3Q P)

0.1%

-0.2%

High

7:00

EUR

German GDP w.d.a. (YoY) (3Q P)

1.1%

1.2%

High

7:00

EUR

German GDP n.s.a. (YoY) (3Q P)

1.0%

0.8%

High

9:00

EUR

Italian GDP (QoQ) (3Q P)

-0.1%

-0.2%

Medium

9:00

EUR

Italian GDP (YoY) (3Q P)

-0.4%

-0.2%

Medium

9:30

EUR

Italian General Government Debt (SEP)

-

2148.4B

Low

9:30

GBP

Construction Output s.a. (MoM) (SEP

4.0%

-3.9%

Low

9:30

GBP

Construction Output s.a. (YoY) (SEP)

4.3%

-0.3%

Low

10:00

EUR

Eurozone CPI (MoM) (OCT)

0.0%

0.4%

Medium

10:00

EUR

Eurozone CPI (YoY) (OCT F)

0.4%

0.4%

Medium

10:00

EUR

Eurozone CPI - Core (YoY) (OCT F)

0.7%

0.7%

Medium

10:00

EUR

Eurozone GDP s.a. (QoQ) (3Q A)

0.1%

0.1%

High

10:00

EUR

Eurozone GDP s.a. (YoY) (3Q A)

0.7%

0.8%

High

11:00

EUR

ECB Announces 3-Year LTRO Repayment

-

-

Medium

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EURUSD

1.2335

1.2400

1.2439

1.2465

1.2504

1.253

1.2595

GBPUSD

1.5555

1.5642

1.5677

1.5729

1.5764

1.5816

1.5903

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

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