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Euro May Overlook Soft German CPI Data, Swiss Franc Under Fire

Euro May Overlook Soft German CPI Data, Swiss Franc Under Fire

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • Euro Unlikely to Find Potent Catalyst in Weak German Inflation Figures
  • Swiss Franc Pressured, NZ Dollar and Yen in Corrective Mode Overnight
  • See Economic News Directly on Your Charts with the DailyFX News App

January’s preliminary set of German CPI figures headlines the economic calendar in European trading hours. The benchmark year-on-year inflation rate is expected to slip into negative territory for the first time since September 2009, when price growth was crafting a bottom in the aftermath of the Great Recession. While the outcome will serve to support the case for aggressive monetary stimulus, its impact on the Euro may prove limited. Mario Draghi and company have just unveiled a sizable QE program and have surely moved to wait-and-see mode, at least for now. That means another soft CPI print will mean relatively little for forward-looking policy bets, offering little impetus for FX volatility.

The Swiss Franc underperformed in overnight trade, sliding as much as 0.8 percent on average against its leading counterparts. A singular, clearly-defined catalyst for the move was not readily apparent. The SNB is due to report on it’s the allocation of its FX reserves tomorrow, which may help investors gauge how officials might go about dealing with CHF495 billion in holdings accumulated as part of maintaining the now-defunct EURCHF floor. Elsewhere, a worrisome Business Times article warned of on-coming capital flight from Swiss banks that opt to pass on SNB-imposed negative rates to clients.

The New Zealand Dollar corrected higher having slumped following a dovish RBNZ monetary policy announcement. The central bank backed off hawkish rhetoric presented in December, saying it expected to keep borrowing costs on hold “for some time” and conspicuously noted that future adjustments can take rates “either up or down”, seemingly opening the door for easing. Indeed, the markets’ priced-in 12 month RBNZ outlook now stands at its most dovish in over three years, with traders leaning toward at least one 25bps reduction. The Japanese Yen retraced downward having bested all of its G10 FX counterparts in the prior session.

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Asia Session

GMTCCYEVENTACTEXPPREV
20:00NZDRBNZ Rate Decision3.50%3.50%3.50%
21:45NZDTrade Balance (NZ$) (DEC)-159M75M-285M
21:45NZDTrade Balance YTD (NZ$) (DEC)-159M-830M-453M
21:45NZDExports (NZ$) (DEC)4.42B4.21B4.04B
21:45NZDImports (NZ$) (DEC)4.58B4.13B4.24B
23:00AUDConference Board Leading Index (NOV)0.1%--0.2%
23:50JPYRetail Trade (YoY) (DEC)0.2%0.9%0.5%
23:50JPYRetail Trade (MoM) (DEC)-0.3%0.3%-0.2%
23:50JPYLarge Retailers' Sales (DEC)0.1%0.5%1.1%
23:50JPYLoans & Discounts Corp (YoY) (DEC)3.06%-2.88%
0:30AUDImport Price Index (QoQ) (4Q)0.9%1.4%-0.8%
0:30AUDExport Price Index (QoQ) (4Q)0.0%-1.0%-3.9%

European Session

GMTCCYEVENTEXP/ACTPREVIMPACT
7:00GBPNationwide House Prices (MoM) (JAN)0.3%0.2%Low
7:00GBPNationwide House Prices (YoY) (JAN)6.6%7.2%Low
8:55EURGerman Unemployment Change (JAN)-10K-27KMedium
8:55EURGerman Unemployment Rate (JAN)6.5%6.5%Medium
9:00EUREurozone M3 Money Supply (YoY) (DEC)3.5%3.1%Low
9:00EUREurozone M3 Money Supply (3M) (DEC)3.1%2.7%Low
10:00EUREurozone Business Climate Indicator (JAN)0.120.04Low
10:00EUREurozone Industrial Confidence (JAN)-4.5-5.2Low
10:00EUREurozone Consumer Confidence (JAN F)-8.5-10.9Medium
10:00EUREurozone Economic Confidence (JAN)101.6100.7Low
10:00EUREurozone Services Confidence (JAN)6.05.6Low
13:00EURGerman CPI (MoM) (JAN P)-0.8%0.0%High
13:00EURGerman CPI (YoY) (JAN P)-0.1%0.2%High
13:00EURGerman CPI - EU Harmonised (MoM) (JAN P)-1.0%0.1%Medium
13:00EURGerman CPI - EU Harmonised (YoY) (JAN P)-0.2%0.1%Medium

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EURUSD1.09451.11441.12621.13431.14611.15421.1741
GBPUSD1.48321.49961.50971.51601.52611.53241.5488

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

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