Euro May Rise as PMI Data Overshadows Cyprus Jitters

DailyFX

The Euro may rise as an improvement in March PMI data overshadows Cyprus-linked jitters while policymakers plot the next steps forward.

Talking Points

  • Euro May Rise as PMIs Edge Higher while Cyprus, Italy Fears Simmer
  • Pound Unlikely to Find Lasting Support in Improved Retail Sales Data

Preliminary estimates of March Eurozone PMI figures headline the economic calendar in European hours. The region-wide metric composite gauge is set to show that the pace of contraction in manufacturing- and service-sector activity moderated from the prior month. German PMIs are forecast to continue outperforming, with factory-sector activity seen growing at the fastest pace in 14 months. Meanwhile, German services are due to expand at a pace just a hair softer than the recent peak set in January, which marked the strongest performance since mid-2011.

On balance, this bodes well for the Euro. While the single currency continues to face headline risk from Cyprus and Italy, the level of intensity on both fronts has been reduced to a slow simmer as policymakers plot the next steps forward. That amounts to a lack of “new” bad news to maintain downward pressure beyond the negativity that has already found its way into exchange rates. With this in mind, signs of relative improvement on the economic growth front may reinforce the likelihood that the ECB will remain the only central bank in the G10 FX space to be engaged in monetary tightening (via early repayments of 3-year LTRO loans), offering support to the single currency.

Elsewhere on the docket, Spain is due to sell 2015, 2018 and 2023 bonds, with traders watching average yield levels and bid-to-cover readings to gauge regional sovereign risk jitters present in the markets. UK Retail Sales are set to rise 0.6 percent in February, marking the largest increase in nine months. The outcome may offer a modest boost to the British Pound but the currency’s ability to retain upward momentum seems decidedly limited. Chancellor of the Exchequer George Osborne held firm on the need for continued austerity while offering the Bank of England new flexibility to temporarily deviate from its 2 percent inflation target in the 2013 UK budget unveiled yesterday. That suggests monetary policy will be primary stimulus tool deployed to underpin the economy as it slides toward triple-dip recession. Needless to say this bodes ill for Sterling and we continue to hold short GBPUSD.

Asia Session:

GMT

CCY

EVENT

ACT

EXP

PREV

21:45

NZD

Gross Domestic Product (YoY) (4Q)

3.0%

2.3%

2.0%

21:45

NZD

Gross Domestic Product (QoQ) (4Q)

1.5%

0.9%

0.2%

23:50

JPY

Merchandise Trade Balance Total (¥) (FEB)

-777.5B

-855.9B

-1630.9B

23:50

JPY

Adjusted Merchandise Trade Balance (¥) (FEB)

-1086.6B

-1102.8B

-737.3B

23:50

JPY

Merchandise Trade Exports (YoY) (FEB)

-2.9

-1.7

6.4

23:50

JPY

Merchandise Trade Imports (YoY) (FEB)

11.9

15.0

7.3

0:00

AUD

CBAHIA House Affordability (4Q)

68.9

-

65.8

0:30

AUD

RBA Foreign Exchange Transaction (A$) (FEB)

328M

-

393M

1:45

CNY

HSBC Flash Manufacturing PMI (MAR)

51.7

50.8

50.4

2:00

NZD

Credit Card Spending s.a. (MoM) (FEB)

3.3%

-

-2.5%

2:00

NZD

Credit Card Spending (YoY) (FEB)

4.7%

-

0.5%

4:30

JPY

All Industry Activity Index (MoM) (JAN)

-1.3%

1.8%

5:00

JPY

Supermarket Sales (YoY) (FEB)

-4.7%

Euro Session:

GMT

CCY

EVENT

EXP

PREV

IMPACT

7:00

CHF

Trade Balance (CHF) (FEB)

2.00B

2.12B

Medium

7:00

CHF

Exports (MoM) (FEB)

-

3.7%

Low

7:00

CHF

Imports (MoM) (FEB)

-

-0.5%

Low

7:00

JPY

Convenience Store Sales (YoY) (FEB)

-

-0.9%

Low

8:00

EUR

French PMI Manufacturing (MAR P)

44.2

43.9

Medium

8:00

EUR

French PMI Services (MAR P)

44.0

43.7

Medium

8:00

CHF

Money Supply M3 (YoY) (FEB)

-

9.2%

Low

8:30

EUR

German PMI Manufacturing (MAR A)

50.5

50.3

High

8:30

EUR

German PMI Services (MAR A)

55.0

54.7

High

9:00

EUR

Euro-Zone PMI Services (MAR A)

48.2

47.9

High

9:00

EUR

Euro-Zone PMI Manufacturing (MAR A)

48.2

47.9

High

9:00

EUR

Euro-Zone PMI Composite (MAR A)

48.2

47.9

High

9:30

EUR

Spain to Sell 2015-23 Bonds

-

-

Medium

9:30

GBP

Public Sector Net Borrowing (£) (FEB)

8.2B

-9.9B

Low

9:30

GBP

Public Finances (PSNCR) (£) (FEB)

-12.0B

-35.6B

Low

9:30

GBP

PSNB ex Interventions (FEB)

8.0B

-11.4B

Low

9:30

GBP

Retail Sales w/Auto Fuel (MoM) (FEB)

0.4%

-0.6%

Low

9:30

GBP

Retail Sales w/Auto Fuel (YoY) (FEB)

0.5%

-0.6%

Low

9:30

GBP

Retail Sales ex Auto Fuel (MoM) (FEB)

0.6%

-0.5%

Medium

9:30

GBP

Retail Sales ex Auto Fuel (YoY) (FEB)

1.2%

0.2%

Medium

11:00

GBP

CBI Trends Total Orders (MAR)

-15

-14

Low

11:00

GBP

CBI Trends Selling Prices (MAR)

17

20

Low

Critical Levels:

CCY

SUPPORT

RESISTANCE

EURUSD

1.2867

1.2989

GBPUSD

1.5023

1.5182

--- 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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