US Dollar, British Pound to Look Past CPI Data as FOMC Looms Large

2015-12-15 06:38:00

Talking Points:

New Zealand Dollar Outperforms as G10 FX Pre-Positioning for FOMC Continues
US Dollar May Not Find Fuel in Inflation Data Supporting Status-Quo Fed Bets
UK CPI May Offer Little to Near-Term BOE Outlook, Passing with Little Fanfare

The New Zealand Dollars outperformed as the G10 currencies stage a broad-based advance against the US Dollar. The move is playing out against a backdrop of falling US Treasury bond yields, hinting that continued pre-positioning ahead of this week’s FOMC policy announcement is the driver behind price action.

Within this context, a shift toward neutral on speculative positioning in the face of looming event risk may be the theme du jour. Indeed, the CFTC’s latest Commitment of Traders report showed investors’ net long USD exposure hit a three-month high last week.

Looking ahead, November’s US CPI data is in focus. The core year-on-year inflation rate is expected to rise to 2 percent, the highest since May 2014. The pickup would support the Fed’s predilection for the start of stimulus withdrawal, suggesting the trend in price growth is poised to return toward the central bank’s target once last year’s rapid slump in oil prices rebases out of year-on-year calculations.

The markets are already pricing in an 83 percent probability of a 25bps rate hike however, meaning an upbeat print is unlikely to generate a big-splash response. A downside surprise would clash with the established outlook and may feed liquidation of long-USD exposure.

UK CPI figures are likewise on tap. Consensus forecasts put the core year-on-year price growth rate at a four-month high of 1.2 percent. While certainly an improvement, an outcome within the vicinity of expectations would only underscore the long way that inflation has to go to come within striking distance of the BOE’s target. That means it probably won’t meaningfully accelerate the projected timeline for a rate hike and thereby offer little by way of direction cues to the British Pound.

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Asia Session

GMT	CCY	EVENT	ACT	EXP	PREV
00:30	AUD	RBA December Meeting Minutes	-	-	-
00:30	AUD	House Price Index (QoQ) (3Q)	2.0%	2.0%	4.7%
00:30	AUD	House Price Index (YoY) (3Q)	10.7%	10.2%	9.8%
00:30	AUD	New Motor Vehicle Sales (MoM) (NOV)	1.0%	-	-3.7%
00:30	AUD	New Motor Vehicle Sales (YoY) (NOV)	6.0%	-	3.9%

European Session

GMT	CCY	EVENT	EXP	PREV	IMPACT
07:00	EUR	EU27 New Car Registrations (NOV)	-	2.9%	Low
08:15	CHF	Producer & Import Prices (MoM) (NOV)	-0.1%	0.2%	Medium
08:15	CHF	Producer & Import Prices (YoY) (NOV)	-6.1%	-6.6%	Medium
09:30	GBP	CPI (MoM) (NOV)	-0.1%	0.1%	High
09:30	GBP	CPI (YoY) (NOV)	0.1%	-0.1%	High
09:30	GBP	CPI Core (YoY) (NOV)	1.2%	1.1%	High
09:30	GBP	RPI (MoM) (NOV)	0.0%	0.0%	Low
09:30	GBP	RPI (YoY) (NOV)	0.9%	0.7%	Low
09:30	GBP	RPI Ex Mort Int. Payments (YoY) (NOV)	1.0%	0.8%	Low
09:30	GBP	PPI Input NSA (MoM) (NOV)	-1.0%	0.2%	Low
09:30	GBP	PPI Input NSA (YoY) (NOV)	-12.4%	-12.1%	Low
09:30	GBP	PPI Output NSA (MoM) (NOV)	-0.1%	0.0%	Medium
09:30	GBP	PPI Output NSA (YoY) (NOV)	-1.3%	-1.3%	Medium
09:30	GBP	PPI Output Core NSA (MoM) (NOV)	0.0%	-0.1%	Low
09:30	GBP	PPI Output Core NSA (YoY) (NOV)	0.1%	0.3%	Low
09:30	GBP	ONS House Price (YoY) (OCT)	-	6.1%	Low
10:00	EUR	Eurozone Employment (QoQ) (3Q)	-	0.3%	Medium
10:00	EUR	Eurozone Employment (YoY) (3Q)	-	0.8%	Medium
10:00	EUR	German ZEW Survey Current Situation (DEC)	54.2	54.4	Medium
10:00	EUR	German ZEW Survey Expectations (DEC)	15.0	10.4	Medium
10:00	EUR	Eurozone ZEW Survey Expectations (DEC)	-	28.3	Medium