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Pound Eyes Carney Comments, Risk Aversion Poised to Continue

Pound Eyes Carney Comments, Risk Aversion Poised to Continue

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • Euro Unlikely to Find Lasting Follow-Through in German Inflation Figures
  • British Pound Looks to Carney Comments for Cues After Hitting 5-Month Low
  • See Economic Releases Directly on Your Charts with the DailyFX News App

Risk aversion continued to dominate financial markets in overnight trade. The sentiment-geared Australian and New Zealand Dollars plunged alongside Asian stocks while the safety-linked Japanese Yen outperformed. The MSCI Asia Pacific regional benchmark equity index fell 2 percent in a follow-on move after a deep slump on Wall Street.

S&P 500 futures are pointing substantively lower ahead of the opening bell in Europe, hinting the risk-off dynamic is likely to continue in the hours ahead. The preliminary set of September’s German CPI figures is in focus on the economic data front. The benchmark year-on-year inflation rate is expected to tick lower to 0.1 percent, the lowest in seven months.

News-flow out of the Eurozone’s largest economy has increasingly outperformed relative to consensus forecast since early July, opening the door for an upside surprise. The Euro may not see significant follow-through from such a result however considering the central bank has dismissed re-visiting the size of its QE effort before December.

Meanwhile, Bank of England Governor Mark Carney is due to speak. Interest rate hike expectations have unraveled alongside a plunge in global share prices since mid-month, suggesting traders are betting that market turmoil will encourage the MPC to wait before starting to remove accommodation. The British Pound has dutifully declined, touching a five-month low against the US Dollar late last week.

Carney had been somewhat dismissive of risk trends’ impact on the trajectory of monetary policy and traders will look for a dovish tone shift this time around to confirm their suspicions. The UK unit is likely to extend losses in this scenario. Alternatively, comments paving the way for tightening in the relatively near term may offer a lifeline to the embattled currency, although it ought to be kept in mind that similar rhetoric has been unable to offer lasting support in recent weeks.

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Asia Session

GMTCCYEVENTACTEXPPREV
21:00USDFed's Williams Speaks on Economic Outlook---
23:30AUDWeekly Consumer Confidence Index (SEP 27)110.6-114.5
00:37CNYLeading Index (AUG)98.23-98.4
05:00JPYSmall Business Confidence (SEP)49.048.348.8

European Session

GMTCCYEVENTEXPPREVIMPACT
06:00EURGerman Import Price Index (MoM) (AUG)-1.4%-0.7%Medium
06:00EURGerman Import Price Index (YoY) (AUG)-3.0%-1.7%Medium
08:30GBPNet Consumer Credit (£) (AUG)1.2B1.2BLow
08:30GBPNet Lending Sec. on Dwellings (£) (AUG)2.9B2.7BLow
08:30GBPMortgage Approvals (AUG)69.8k68.8kMedium
08:30GBPM4 Money Supply (MoM) (AUG)-1.0%Low
08:30GBPM4 Money Supply (YoY) (AUG)-0.6%Low
08:30GBPM4 Ex IOFCs 3M Annualised (AUG)3.9%3.7%Low
09:00EUREurozone Economic Confidence (SEP)104.1104.2Low
09:00EUREurozone Business Climate Indicator (SEP)0.210.21Low
09:00EUREurozone Industrial Confidence (SEP)-3.8-3.7Low
09:00EUREurozone Services Confidence (SEP)10.010.2Low
09:00EUREurozone Consumer Confidence (SEP F)-7.1-7.1Medium
10:00GBPCBI Reported Sales (SEP)28.024.0Low
12:00EURGerman CPI (MoM) (SEP P)-0.1%0.0%High
12:00EURGerman CPI (YoY) (SEP P)0.1%0.2%High
12:00EURGerman CPI - EU Harmonized (MoM) (SEP P)-0.1%0.0%Medium
12:00EURGerman CPI - EU Harmonized (YoY) (SEP P)0.0%0.1%Medium

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EURUSD1.10111.11121.11781.12131.12791.13141.1415
GBPUSD1.50251.51081.51411.51911.52241.52741.5357

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

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