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Euro, US Dollar Outlook Hinges on Fed and ECB Commentary

Euro, US Dollar Outlook Hinges on Fed and ECB Commentary

Talking Points:

  • Euro, US Dollar Focused on Comments from Leading Fed and ECB Officials
  • Australian Dollar Soars as Impressive Jobs Report Cools RBA Rate Cut Bets
  • See Economic Releases Directly on Your Charts with the DailyFX News App

Central bank commentary dominates the spotlight in European trading hours. ECB President Mario Draghi is due to testify in the EU Parliament. A long list of Fed speakers including Chair Yellen, Vice Chair Fischer as well as branch Presidents Bullard, Lacker and Evans and Dudley is also on tap. Traders will comb through the remarks for clues about on-coming ECB stimulus expansion and a Fed rate hike in December.

For the ECB, the markets wonder if officials will opt for something restrained or a big-splash gesture. The former could be a broader range of QE-eligible assets or an extension of QE beyond September 2016. The latter may mean asset purchases larger than €60/month or a more negative deposit rate. Signaling a preference for the lighter touch may boost the Euro while an aggressive posture threatens to put it under pressure.

Turning to the Fed, the policy preferences of most scheduled speakers is widely known at this point. Resignation to imminent “liftoff” on the part of a dove like Mr Evans (as was the case with similarly-minded Eric Rosengren earlier in the week) may go a long way however, sending the US Dollar higher. As it stands, Fed funds futures imply a 67.8 percent priced-in probability for a 25bps rate hike in December.

The Australian Dollar soared following the release of dramatically better-than-expected Employment report. The economy added a net 58.6k jobs in October, dwarfing economists’ forecasts calling for a 15k increase and producing the largest monthly increase in since March 2012. The jobless rate dropped to 5.9 percent, the lowest in 19 months.

The currency pushed higher alongside a surge in front-end bond yields, suggesting the upbeat report undermined RBA easing speculation. Indeed, the priced-in probability of a rate cut at next month’s meeting has plunged to less than 20 percent from 67 percent at the end of last week.

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Asia Session

GMTCCYEVENTACTEXPPREV
21:30NZDBusinessNZ Manufacturing PMI (OCT)53.3-55.0
21:45NZDFood Prices (MoM) (OCT)-1.2%--0.5%
23:50JPYLoans & Discounts Corp (YoY) (SEP)2.87%-3.07%
23:50JPYPPI (MoM) (OCT)-0.6%-0.4%-0.6%
23:50JPYPPI (YoY) (OCT)-3.8%-3.5%-4.0%
23:50JPYMachine Orders (MoM) (SEP)7.5%3.1%-5.7%
23:50JPYMachine Orders (YoY) (SEP)-1.7%-4.6%-3.5%
00:00NZDANZ Consumer Confidence Index (NOV)122.7-114.9
00:00NZDANZ Consumer Confidence (MoM) (NOV)6.8%-3.7%
00:00AUDConsumer Inflation Expectation (NOV)3.5%-3.5%
00:01GBPRICS House Price Balance (OCT)49.0%45.0%44.0%
00:30AUDEmployment Change (OCT)58.6K15.0K-0.8K
00:30AUDUnemployment Rate (OCT)5.9%6.2%6.2%
00:30AUDFull Time Employment Change (OCT)40.0K--10.4K
00:30AUDPart Time Employment Change (OCT)18.6K-9.6K
00:30AUDParticipation Rate (OCT)65.0%64.9%64.9%
00:30AUDCredit Card Purchases (A$) (SEP)24.8B-24.4B
00:30AUDCredit Card Balances (A$) (SEP)50.8B-50.6B
02:00JPYTokyo Avg Office Vacancies (OCT)4.46-4.53

European Session

GMTCCYEVENTEXPPREVIMPACT
07:00EURGerman CPI (MoM) (OCT F)0.0%0.0%Medium
07:00EURGerman CPI (YoY) (OCT F)0.3%0.3%Medium
07:00EURGerman CPI - EU Harmonized (MoM) (OCT F)0.0%0.0%Medium
07:00EURGerman CPI - EU Harmonized (YoY) (OCT F)0.2%0.2%Medium
08:30EURECB's Draghi Testifies in EU Parliament --High
10:00EUREurozone Industrial Production (MoM) (SEP)-0.1%-0.5%Medium
10:00EUREurozone Industrial Production (YoY) (SEP)1.3%0.9%Medium

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EURUSD1.06051.06731.07081.07411.07761.08091.0877
GBPUSD1.49761.50801.51461.51841.5251.52881.5392

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

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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