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Pound Looks to Core CPI for Rates Cues, Greece Woes Continue to Fester

Pound Looks to Core CPI for Rates Cues, Greece Woes Continue to Fester

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • British Pound to Overlook Headline UK CPI, Take Cues from Core Figures
  • Greece Woes Remain in Focus as EU Finance Ministers Convene in Brussels
  • See Economic Releases Directly on Your Charts with the DailyFX News App

January’s UK CPI figures are in focus in European trading hours. The headline year-on-year inflation rate is expected to drop to 0.4 percent, the lowest since at least 1989, but the BOE’s sanguine posture on this front will likely dilute the figures’ potency. Speaking in the context of the quarterly Inflation Report released last week, Governor Mark Carney said the central bank intends to look past near-term downside inflation shocks from falling food and oil prices.

Instead, all eyes will be focused on the core CPI print – a reading that excludes the influence of volatile items the BOE has opted to dismiss – which is expected to rise for a second month to 1.4 percent. An upbeat outcome may bolster bets on an interest rate hike this year, driving the British Pound higher. UK price growth data has broadly tended to underperform relative to consensus forecasts over the past two years however. If that proves to foreshadow a disappointing print, the UK unit may retreat.

Meanwhile, EU finance ministers are gearing up for a meeting in Brussels, with the impasse over Greek debt obligations looming large. Another fruitless Eurogroup sit-down yesterday ended with continued stalemate. Greece now has until the end of the week to request an extension of its existing bailout arrangement – a move staunchly opposed by the newly-minted Syriza-led government – or risk running out of cash.

Needless to say, the latter scenario carries potentially disastrous consequences, with the worst-case scenario amounting to Greece’s exit from the Eurozone. With that in mind, investors will be watching with keen interest to see if anything more substantive emerges from today’s outing. While political brinksmanship prior to the emergence of an accord has been the status quo since the onset of Euro area debt woes, the possibility of failureis acutely real. This shrouds the outlook for the Euro and sentiment-sensitive currencies like the Japanese Yen in uncertainty for the time being.

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Asia Session

GMTCCYEVENTACTEXPPREV
22:30AUDANZ Roy Morgan Weekly Consumer Conf109.8-111.7
0:30AUDRBA February Meeting Minutes---
1:30CNYChina January Property Prices---
1:45CNYMNI Business Indicator (FEB)52.8-53.7

European Session

GMTCCYEVENTEXPPREVIMPACT
7:00EUREU 25 New Car Registrations (JAN)-4.7%Low
8:00EUREU Finance Ministers Meet in Brussels--High
9:30GBPCPI (MoM) (JAN)-0.8%0.0%High
9:30GBPCPI (YoY) (JAN)0.4%0.5%High
9:30GBPCore CPI (YoY) (JAN)1.4%1.3%High
9:30GBPPPI Input n.s.a. (MoM) (JAN)-2.4%-2.4%Low
9:30GBPPPI Input n.s.a. (YoY) (JAN)-11.9%-10.7%Low
9:30GBPPPI Output n.s.a. (MoM) (JAN)-0.3%-0.3%Medium
9:30GBPPPI Output n.s.a. (YoY) (JAN)-1.4%-0.8%Medium
9:30GBPPPI Output Core n.s.a. (MoM) (JAN)0.1%0.0%Medium
9:30GBPPPI Output Core n.s.a. (YoY) (JAN)0.4%0.8%Medium
9:30GBPRPI (MoM) (JAN)-0.7%0.2%Low
9:30GBPRPI (YoY) (JAN)1.3%1.6%Low
9:30GBPRPI ex Mort Int. Payments (YoY) (JAN)1.3%1.7%Low
9:30GBPONS House Prices (YoY) (DEC)9.5%10.0%Low
10:00EURGerman ZEW Survey (Current Situation) (FEB)30.022.4High
10:00EURGerman ZEW Survey (Econ. Sentiment) (FEB)55.048.4High
10:00EUREurozone ZEW Survey (Econ. Sentiment) (FEB)-45.2Medium

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EURUSD1.11501.12591.13071.13681.14161.14771.1586
GBPUSD1.51811.52811.53221.53811.54221.54811.5581

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

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