Dollar at Risk as Sentiment Firms Before Consumer Confidence Data

DailyFX

Talking Points

  • Eurozone Industrial Production Data Unlikely to Prove Market-Moving
  • US Dollar May Face Selling Pressure if UofM Data Surprises to the Upside
  • S&P 500 Futures Point to Risk-On Mood Ahead of WFC, JPM Earnings
  • Japanese Yen Sold on Fading Haven Demand as Stocks Rise in Asian Trade

The economic calendar is relatively quiet in European hours, with Eurozone Industrial Production figures headlining an otherwise lackluster set of scheduled releases. Output is seen falling -4.1 percent in August compared with a year prior, marking the sharpest contraction since November 2009. Growth has been slowing since May 2010 and contracting since November 2011 however, meaning markets have had ample opportunity to price in the poor state of regional manufacturing. That suggests today’s release is unlikely to yield much of a lasting response from price action.

Later in the day, the spotlight turns to the University of Michigan gauge of US Consumer Confidence. Sentiment is expected to nudge lower in October after hitting a four-month high in the previous month. Markets continue to hope a firmer US recovery will help offset headwinds from a recession in Europe and a slowdown in Asia. This means soft data from the world’s top economy is likely to carry negative implications for risk appetite, boosting the safe-haven US Dollar against most of its major counterparts.

With that in mind, US economic data has generally tended surpass expectations by an increasing margin over recent weeks (according to data from Citigroup), meaning the probability of a sentiment-supportive upside surprise appears credible. S&P 500 stock index futures are pointing higher in late Asian trade, pointing to a risk-on mood into the end of the trading week. On the earnings front, reports from JPMorgan Chase and Wells Fargo will be scoured for clues about the impact of the Eurozone debt crisis on US financial institutions.

The Japanese Yen underperformed in overnight trade as Asian stocks advanced, denting demand for the go-to regional haven currency. The MSCI Asia Pacific benchmark equity index added 0.5 percent, a move the newswires chalked up to follow-through from an advance on Wall Street after US Jobless Claims rose less than expected. China and Japan also reportedly agreed to hold talks to iron out their territorial disputes, which may have likewise proved supportive.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

23:50

JPY

Japan Money Stock M2 + CD (YoY) (SEP)

2.4%

2.4%

2.4%

23:50

JPY

Japan Money Stock M3 (YoY) (SEP)

2.0%

2.0%

2.1%

23:50

JPY

Tertiary Industry Index (MoM) (AUG)

0.4%

0.4%

-0.7%

23:50

JPY

Domestic Corporate Goods Price Index (MoM) (SEP)

0.3%

0.2%

0.2%

23:50

JPY

Domestic Corporate Goods Price Index (YoY) (SEP)

-1.4%

-1.4%

-1.9%

1:30

AUD

RBA Credit Card Purchases (A$) (AUG)

21.7B

-

21.3B

1:30

AUD

RBA Credit Card Balances (A$) (AUG)

49.2B

-

49.7B

2:00

NZD

Non Resident Bond Holdings (SEP)

62.4%

-

61.8%

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

6:45

EUR

French Current Account (€) (AUG)

-

-2.5B

Low

8:00

EUR

Italian CPI - EU Harmonized (MoM) (SEP F)

2.1%

2.1%

Low

8:00

EUR

Italian CPI - EU Harmonized (YoY) (SEP F)

3.4%

3.4%

Low

8:00

EUR

Italian CPI (NIC incl. tobacco) (MoM) (SEP F)

0.0%

0.0%

Low

8:00

EUR

Italian CPI (NIC incl. tobacco) (YoY) (SEP F)

3.2%

3.2%

Low

9:00

EUR

Euro-Zone Industrial Production s.a. (MoM) (AUG)

-0.4%

0.5%

Medium

9:00

EUR

Euro-Zone Industrial Production w.d.a. (YoY) (AUG)

-4.1%

-2.4%

Medium

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2852

1.3028

GBPUSD

1.6002

1.6097

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

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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