News Column

Forex: Euro Unlikely to Find Strength GDP Data, Dollar May Rise on CPI

May 14, 2014

Ilya Spivak

Talking Points:



  • First-Quarter Eurozone GDP Data Carries Downside Surprise Risk
  • Euro Gains Unlikely to Prove Lasting Even on Upbeat GDP Print
  • US Dollar May Rise as April's US CPI Figures Boost Fed Outlook



    The preliminary estimate of the first-quarter Eurozone GDP reading headlines the economic calendar in European trading hours. Output is expected to have added 0.4 percent in the three months through March, marking the strongest pace of expansion in three years. Economic data outcomes from the currency bloc have proven increasingly disappointing in recent months, with data from Citigroup revealing that realized results are now trailing analysts' estimates by the largest margin in over 11 months. That warns of the possibility of a downside surprise.



    Critically, even an upbeat print may not offer lasting support to the Euro. Economic data is significant to guiding exchange rates in that it helps investors establish the likely direction of future monetary policy. For the ECB, a statutory focus on price stability means that even a pickup in the rate of output growth will not necessarily discourage an expansion of stimulus efforts while stubborn disinflation remains a lingering concern. With that in mind, a near-term bounce on the back of a rosy GDP print is unlikely to see follow-through and we continue to look for EURUSD selling opportunities.



    Later in the day, the spotlight turns to April's US CPI report, which is due to show that the benchmark year-on-year inflation rate advanced to a nine-month high of 2 percent. US price growth readings have been outperforming consensus forecasts since January and overall economic news-flow began to firm relative to expectations in early April. On balance, that suggests analysts are underestimating the pace of inflation as well as the overall resilience of the US recovery, opening the door for an upside surprise.



    Needless to say, such a result bodes well for the US Dollar against most of its leading counterparts. One possible exception could be the USDJPY: a pickup in speculation about US stimulus withdrawal may weigh on risk appetite, driving liquidation of Yen-funded carry trades and pushing the Japanese unit broadly higher. We continue to hold short GBPJPY.









    Asia Session



    GMT

    CCY

    EVENT

    ACT

    EXP

    PREV

    22:30

    NZD

    Business NZ PMI (APR)

    55.2

    -

    58.0

    23:50

    JPY

    Tertiary Industry Index (MoM) (MAR)

    2.4%

    2.2%

    -0.9%

    23:50

    JPY

    GDP (QoQ) (1Q P)

    1.5%

    1.0%

    0.1%

    23:50

    JPY

    GDP Annualized (1Q P)

    5.9%

    4.2%

    0.3%

    23:50

    JPY

    Nominal GDP (QoQ) (1Q P)

    1.2%

    1.0%

    0.2%

    23:50

    JPY

    GDP Deflator (YoY) (1Q P)

    0.0%

    -0.1%

    -0.3%

    23:50

    JPY

    GDP Consumer Spending (QoQ) (1Q P)

    2.1%

    2.1%

    0.4%

    23:50

    JPY

    GDP Business Spending (QoQ) (1Q P)

    4.9%

    2.2%

    1.4%

    1:30

    AUD

    New Motor Vehicle Sales (MoM) (APR)

    0.0%

    -

    -0.3%

    1:30

    AUD

    New Motor Vehicle Sales (YoY) (APR)

    -1.9%

    -

    -2.9%

    1:30

    AUD

    RBA FX Transactions Market (A$) (APR)

    325M

    -

    736M

    1:30

    AUD

    RBA FX Transactions Gov't (A$) (APR)

    -375M

    -

    -763M

    1:30

    AUD

    RBA FX Transactions Other (A$) (APR)

    54M

    -

    38M

    5:00

    JPY

    Consumer Confidence Index (APR)



    -

    37.5





    European Session



    GMT

    CCY

    EVENT

    EXP

    PREV

    IMPACT

    5:30

    EUR

    French GDP (YoY) (1Q P)

    0.9%

    0.8%

    Medium

    5:30

    EUR

    French GDP (QoQ) (1Q P)

    0.1%

    0.3%

    Medium

    6:00

    EUR

    German GDP (QoQ) (1Q P)

    0.7%

    0.4%

    High

    6:00

    EUR

    German GDP w.d.a. (YoY) (1Q P)

    2.2%

    1.4%

    High

    6:00

    EUR

    German GDP n.s.a. (YoY) (1Q P)

    2.5%

    1.3%

    High

    7:15

    CHF

    Producer & Import Prices (MoM) (APR)

    0.0%

    0.1%

    Low

    7:15

    CHF

    Producer & Import Prices (YoY) (APR)

    -0.5%

    -0.7%

    Low

    8:00

    EUR

    ECB Publishes Monthly Report

    -

    -

    Medium

    8:00

    EUR

    Italian GDP (QoQ) (1Q P)

    0.2%

    0.1%

    Medium

    8:00

    EUR

    Italian GDP (YoY) (1Q P)

    -0.1%

    -0.9%

    Medium

    9:00

    EUR

    Euro-Zone CPI (MoM) (APR)

    0.2%

    0.9%

    Medium

    9:00

    EUR

    Euro-Zone CPI (YoY) (APR F)

    0.7%

    0.5%

    Medium

    9:00

    EUR

    Euro-Zone CPI - Core (YoY) (APR F)

    1.0%

    1.0%

    Medium

    9:00

    EUR

    Euro-Zone GDP (QoQ) (1Q A)

    0.4%

    0.2%

    High

    9:00

    EUR

    Euro-Zone GDP (YoY) (1Q A)

    1.1%

    0.5%

    High



    Critical Levels



    CCY

    Supp 3

    Supp 2

    Supp 1

    Pivot Point

    Res 1

    Res 2

    Res 3

    EUR/USD

    1.3649

    1.3682

    1.3698

    1.3715

    1.3731

    1.3748

    1.3781

    GBP/USD

    1.6557

    1.6678

    1.6722

    1.6799

    1.6843

    1.6920

    1.7041














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    Source: DailyFx


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