Macro Events & News

FX News Today

European Fixed Income Outlook: Stock markets declined in Asia overnight in the wake of a correction on Wall Street Tuesday after the dollar recovered. The Nikkei closed down -0.35% the Hand Seng is down -0.16%. FTSE 100 futures are also in the red, but U.S. futures are slightly higher. 10-year yields picked up in the U.S. and Japan. Stock indices remain at high levels but recent advances have triggered warnings of overheating as focus turns to the earnings season and central banks. Today’s calendar has the final reading of Eurozone HICP inflation, which is expected to confirm the headline rate at 1.4% y/y and core at 0.9% y/y, adding to the arguments of the doves at the ECB who are still reluctant to confirm to a final end date for QE just yet.

FX Update: EURUSD bottomed at 1.2196 early in the N.Y. session  yesterday, before making its way to 1.2248 highs into the London close. The euro dropped sharply on political concerns in Germany, with some SPD factions reportedly uncertain, or in outright rejection, of proposals to form a grand coalition. This rattled EURUSD and euro crosses, which had been aggressively bid up in recent sessions. Potential for further fallout in Germany may keep euro bulls sidelined for the time being. Meanwhile, ECB speeches also put some pressure on the Euro. ECB hawk Weidmann suggests rate hike won’t come before 2019. The Bundesbank President once again stressed his preference to end net asset purchases this year, but at the same time repeated his effort to play down the risk of a rate hike already this year, which flared up after the release of the minutes. ECB Vice President Constancio eyes sudden movements in EUR. At the same time he, in line with other council members, tried to play down the implications of the minutes from the last meeting saying that even if the council sees the need for a gradual adjustment in the forward guidance “if the economy continues to grow and inflation continues to move” towards target, “this does not mean that changes will be immediate”. Constancio stressed that the ECB is not changing the path of its monetary policy, and that monetary policy will remain very accommodative for a long time.

Charts of the Day

 Main Macro Events Today        

  • Eurozone CPI – is forecast to remain unchanged at 1.4%y/y, while core is set to fall 0.9%y/y vs 1.1%y/y .
  • US Industrial Production – expected to rise 0.4% after the 0.2% November gain, to bring capacity utilization up to 77.2% from 77.1%
  • BoC Monetary Policy Report – A 25 bp hike to 1.25% is expected today. The Monetary Policy Report, should reveal a still cautiously upbeat growth outlook that is consistent with a gradual normalization path. Labour market slack and uncertainty kept the Bank of Canada (BoC) from implementing further rate hikes in October and December of last year. But recent economic reports suggest labour market slack has seen significant unwinding. Of course, uncertainties remain elevated, notably on the outlook for NAFTA.
  • FOMC Member Kaplan and Mester Speech

Support and Resistance Levels

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Andria Pichidi

Market Analyst


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