Forex: Euro Reversal May Be Triggered by German CPI Report

DailyFX

Talking Points:

  • Euro to Fall if Soft German CPI Print Drives ECB Stimulus Expectations
  • Thin Holiday Liquidity May Amplify Impact of Unexpected Headline Risk
  • Aussie, New Zealand Dollars Rise as Risk Appetite Firms on Asian Bourses

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The preliminary estimate of November’s German CPI figures headlines the economic calendar in European hours. The headline year-on-year inflation rate is expected to print at 1.2 percent, matching the six-month low recorded in the prior month.

A downside surprise on October’s report foreshadowed a drop below 1 percent on the Eurozone region-wide CPI print for the same period and paved the way for a surprise ECB interest rate cut. News-flow from the currency bloc has increasingly underperformed relative to expectations in the past three months, opening the door for a similar outcome this time around. That would feed speculation about further accommodation, driving the Euro lower. We continue to hold short EUR/USD.

Also of note, liquidity is likely to turn scarce as US financial markets shut down for the Thanksgiving holiday. While thin trading conditions can make for muted price, they can likewise amplify volatility in the event that unforeseen headline risk or a particularly sharp deviation from economic data expectations spooks investors.

The Australian and New Zealand Dollars outperformed overnight trade as Asian stocks advancing, pulling the sentiment-linked currencies upward along the way. The MSCI Asia Pacific regional benchmark equity index rose 0.7 percent in a move the newswires chalked up to swelling confidence in the US recovery after an upbeat set of Jobless Claims and UofM Consumer Confidence figures.

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Asia Session:

GMT

CCY

EVENT

ACT

EXP

PREV

23:50

JPY

Retail Trade (YoY) (OCT)

2.3%

2.1%

3.0%

23:50

JPY

Retail Trade s.a. (MoM) (OCT)

-1.0%

-0.8%

1.7%

23:50

JPY

Large Retailers' Sales (OCT)

-0.4%

-0.1%

0.7%

0:00

NZD

ANZ Activity Outlook (NOV)

47.1

-

47.1

0:00

NZD

ANZ Business Confidence (NOV)

60.5

-

53.2

0:00

AUD

HIA New Home Sales (MoM) (OCT)

-3.8%

-

6.4%

0:30

AUD

Private Capital Expenditure (3Q)

3.6%

-1.2%

1.6%

1:30

CNY

Industrial Profits YTD (YoY) (OCT)

13.7%

-

13.5%

Euro Session:

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

6:45

CHF

GDP (YoY) (3Q)

1.8%

2.5%

Medium

6:45

CHF

GDP (QoQ) (3Q)

0.4%

0.5%

Medium

7:00

EUR

German Import Price Index (MoM) (OCT)

-0.3%

0.0%

Low

7:00

EUR

German Import Price Index (YoY) (OCT)

-2.6%

-2.8%

Low

8:55

EUR

German Unemployment Rate s.a. (NOV)

6.9%

6.9%

High

8:55

EUR

German Unemployment Change (NOV)

0K

2K

High

9:00

EUR

Euro-Zone M3 s.a. (YoY) (OCT)

1.7%

2.1%

Low

9:00

EUR

Euro-Zone M3 s.a. (3M Avg) (OCT)

2.0%

2.2%

Low

9:30

GBP

Lloyds Business Barometer (NOV)

-

63

Low

10:00

EUR

Euro-Zone Economic Confidence (NOV)

98.0

97.8

Low

10:00

EUR

Euro-Zone Industrial Confidence (NOV)

-4.4

-4.8

Low

10:00

EUR

Euro-Zone Consumer Confidence (NOV F)

-15.4

-15.4

Medium

10:00

EUR

Euro-Zone Services Confidence (NOV)

-3.5

-3.7

Low

10:00

EUR

Euro-Zone Business Climate Indicator (NOV)

0.05

-0.01

Low

13:00

EUR

German CPI (MoM) (NOV P)

0.1%

-0.2%

High

13:00

EUR

German CPI (YoY) (NOV P)

1.2%

1.2%

High

13:00

EUR

German CPI - EU Harmonised (MoM) (NOV P)

-0.1%

-0.3%

Medium

13:00

EUR

German CPI - EU Harmonised (YoY) (NOV P)

1.3%

1.2%

Medium

Critical Levels:

CCY

SUPP 3

SUPP 2

SUPP 1

Pivot Point

RES 1

RES 2

RES 3

EURUSD

1.3473

1.3528

1.3554

1.3583

1.3609

1.3638

1.3693

GBPUSD

1.6006

1.6139

1.6213

1.6272

1.6346

1.6405

1.6538

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

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