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27 Feb 2015
What's next: German inflation to grab most headlines
FXStreet (Bali) - Find below the latest headlines from Thursday in Asia, with Japanese inflation the key event, the main themes dominating FX trading during the Far-East session, and what to expect for the next European session.
Main headlines in Asia
New Zealand: Business confidence progressing nicely
Dominating themes from Friday Asia - centered on JPY, AUD, NZD
AUD/USD saw no buying interest, holding near its yesterday's low as calls continue to mount about another RBA rate cut in March. After the disappointing Australian Capex, varies investment banks the likes of JP Morgan or Westpac, issued new calls today expecting an interest rate cut on Tuesday next week. AUD/USD trades under renewed selling pressure below 0.78, after a big USD rally across the board following surprisingly high US real wage growth.
NZD/USD traded in a firmer tone, testing offers circa 0.7540 in response to an upbeat ANZ business confidence report. Cameron Bagrie, Chief Economist at ANZ, said: "Business sentiment has started the year with an extremely positive tone. Firms’ own activity expectations, employment and investment intentions are all robust and consistent with the economic expansion rolling on at a hefty clip. Pricing gauges remain tame. The RBNZ’s sabbatical is looking to be a long one."
USD/JPY saw a withdraw of liquidity topside, with the pair aiming to test bids near 119.00 after a 119.47 high last Thursday, a level that failed to be breached amid exporters interest. Japanese inflation numbers came largely unchanged, with a down-tick in the core nationwide CPI the most notable outcome. Not the picture the BoJ wishes to see. Overall household spending and jobless rate came weaker-than-expected, while industrial production was the positive note of the day.
Heading into Friday Europe - centered on EUR, GBP
In Europe, preliminary inflation data out of Germany is going to be followed very closely, with the market still expecting depressed numbers, despite some slight optimism on a possible pick up in prices should not be ruled out, as RBS notes.
Brian Daingerfield, FX Trading Strategist at RBS, said: "German economic indicators released over the past month have broadly outperformed. Several measures of confidence, including the GfK measure released this morning, increased more than anticipated in February, and the fourth quarter GDP surprised on the topside. A modest bounce-back in monthly CPI is unlikely to pull the headline CPI out of deflationary territory, but the pickup would be consistent with ECB President Draghi’s comments yesterday, when he noted that the ECB has already seen some positive effects from monetary policy stimulus."
With regards to the Euro, a downside resolution has finally taken effect, with price breaking through 1.1270 support after a much better-than-expected US CPI data, especially wage growth, which has reinforced the case for a Fed rate 'lift-off' mid this year. Federal Reserve Bank of San Francisco President John Williams reinforced the market's belief, leaving the door open to raise interest rates anytime from mid-June, following an interview with the Wall Street Journal. New lows in the EUR/USD are within reach near term after the unambiguously bearish break seen on Thursday.
As per GBP/USD, there is no economic indicators for this Friday, which means that today's price action will most likely be influenced by technicals, which have turned now bearish short term, following the sizeable outside day on Thursday, ahead of the US Q4 GDP data, the key price driver in the NA session.
Main headlines in Asia
New Zealand: Business confidence progressing nicely
Dominating themes from Friday Asia - centered on JPY, AUD, NZD
AUD/USD saw no buying interest, holding near its yesterday's low as calls continue to mount about another RBA rate cut in March. After the disappointing Australian Capex, varies investment banks the likes of JP Morgan or Westpac, issued new calls today expecting an interest rate cut on Tuesday next week. AUD/USD trades under renewed selling pressure below 0.78, after a big USD rally across the board following surprisingly high US real wage growth.
NZD/USD traded in a firmer tone, testing offers circa 0.7540 in response to an upbeat ANZ business confidence report. Cameron Bagrie, Chief Economist at ANZ, said: "Business sentiment has started the year with an extremely positive tone. Firms’ own activity expectations, employment and investment intentions are all robust and consistent with the economic expansion rolling on at a hefty clip. Pricing gauges remain tame. The RBNZ’s sabbatical is looking to be a long one."
USD/JPY saw a withdraw of liquidity topside, with the pair aiming to test bids near 119.00 after a 119.47 high last Thursday, a level that failed to be breached amid exporters interest. Japanese inflation numbers came largely unchanged, with a down-tick in the core nationwide CPI the most notable outcome. Not the picture the BoJ wishes to see. Overall household spending and jobless rate came weaker-than-expected, while industrial production was the positive note of the day.
Heading into Friday Europe - centered on EUR, GBP
In Europe, preliminary inflation data out of Germany is going to be followed very closely, with the market still expecting depressed numbers, despite some slight optimism on a possible pick up in prices should not be ruled out, as RBS notes.
Brian Daingerfield, FX Trading Strategist at RBS, said: "German economic indicators released over the past month have broadly outperformed. Several measures of confidence, including the GfK measure released this morning, increased more than anticipated in February, and the fourth quarter GDP surprised on the topside. A modest bounce-back in monthly CPI is unlikely to pull the headline CPI out of deflationary territory, but the pickup would be consistent with ECB President Draghi’s comments yesterday, when he noted that the ECB has already seen some positive effects from monetary policy stimulus."
With regards to the Euro, a downside resolution has finally taken effect, with price breaking through 1.1270 support after a much better-than-expected US CPI data, especially wage growth, which has reinforced the case for a Fed rate 'lift-off' mid this year. Federal Reserve Bank of San Francisco President John Williams reinforced the market's belief, leaving the door open to raise interest rates anytime from mid-June, following an interview with the Wall Street Journal. New lows in the EUR/USD are within reach near term after the unambiguously bearish break seen on Thursday.
As per GBP/USD, there is no economic indicators for this Friday, which means that today's price action will most likely be influenced by technicals, which have turned now bearish short term, following the sizeable outside day on Thursday, ahead of the US Q4 GDP data, the key price driver in the NA session.