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Euro, US Dollar Outlook Hinges on Fed and ECB Commentary

Euro, US Dollar Outlook Hinges on Fed and ECB Commentary

Ilya Spivak, Head Strategist, APAC

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

GMT

CCY

EVENT

ACT

EXP

PREV

21:30

NZD

BusinessNZ Manufacturing PMI (OCT)

53.3

-

55.0

21:45

NZD

Food Prices (MoM) (OCT)

-1.2%

-

-0.5%

23:50

JPY

Loans & Discounts Corp (YoY) (SEP)

2.87%

-

3.07%

23:50

JPY

PPI (MoM) (OCT)

-0.6%

-0.4%

-0.6%

23:50

JPY

PPI (YoY) (OCT)

-3.8%

-3.5%

-4.0%

23:50

JPY

Machine Orders (MoM) (SEP)

7.5%

3.1%

-5.7%

23:50

JPY

Machine Orders (YoY) (SEP)

-1.7%

-4.6%

-3.5%

00:00

NZD

ANZ Consumer Confidence Index (NOV)

122.7

-

114.9

00:00

NZD

ANZ Consumer Confidence (MoM) (NOV)

6.8%

-

3.7%

00:00

AUD

Consumer Inflation Expectation (NOV)

3.5%

-

3.5%

00:01

GBP

RICS House Price Balance (OCT)

49.0%

45.0%

44.0%

00:30

AUD

Employment Change (OCT)

58.6K

15.0K

-0.8K

00:30

AUD

Unemployment Rate (OCT)

5.9%

6.2%

6.2%

00:30

AUD

Full Time Employment Change (OCT)

40.0K

-

-10.4K

00:30

AUD

Part Time Employment Change (OCT)

18.6K

-

9.6K

00:30

AUD

Participation Rate (OCT)

65.0%

64.9%

64.9%

00:30

AUD

Credit Card Purchases (A$) (SEP)

24.8B

-

24.4B

00:30

AUD

Credit Card Balances (A$) (SEP)

50.8B

-

50.6B

02:00

JPY

Tokyo Avg Office Vacancies (OCT)

4.46

-

4.53

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

07:00

EUR

German CPI (MoM) (OCT F)

0.0%

0.0%

Medium

07:00

EUR

German CPI (YoY) (OCT F)

0.3%

0.3%

Medium

07:00

EUR

German CPI - EU Harmonized (MoM) (OCT F)

0.0%

0.0%

Medium

07:00

EUR

German CPI - EU Harmonized (YoY) (OCT F)

0.2%

0.2%

Medium

08:30

EUR

ECB's Draghi Testifies in EU Parliament

-

-

High

10:00

EUR

Eurozone Industrial Production (MoM) (SEP)

-0.1%

-0.5%

Medium

10:00

EUR

Eurozone Industrial Production (YoY) (SEP)

1.3%

0.9%

Medium

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EURUSD

1.0605

1.0673

1.0708

1.0741

1.0776

1.0809

1.0877

GBPUSD

1.4976

1.5080

1.5146

1.5184

1.525

1.5288

1.5392

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

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