Key Forex Afternoon Notes:
- New Zealand inflation expectations q/q 1.8% vs. 2.1% previously
- German Final GDP q/q 0.7% vs. 0.7%
- Eurozone Final CPI y/y -0.6% vs. -0.6%; Core CPI y/y 0.6% vs. 0.6%
- BoE Inflation report hearing
Later
- ECB Draghi Speech
- US S&P/CS HPI
- US Flash services PMI
- CB Consumer confidence
- Janet Yellen testifies to Senate banking committee
- Richmond manufacturing Index
- BoC Governor Poloz Speech
The financial markets opened today on a quiet note ahead of key speeches from Central Bankers across the US, Europe and the UK. The Asian session saw no major releases with the exception of the New Zealand inflation expectations which declined to 1.8% from 2.1% previously. The news saw a sharp sell off in the Kiwi Dollar which fell from session highs of 0.753 to trade near intraday lows of 0.744. The Aussie dollar was also under pressure falling below 0.778 to trade near the 0.775 handle as markets start to price in another possible rate cut from the RBA next month.
The European markets also saw the same theme with the EURUSD continuing to trade within the larger range of 1.14 and 1.13. With the Greece negotiations seeing some headway as Greece submitted its reforms, albeit a bit delayed, the markets for the moment can focus on other aspects. Today’s economic data from Eurozone included the German GDP and the Eurozone CPI numbers, all of which came out as expected. The Euro briefly fell to lows below 1.13, hitting a session low to 1.12985 before easing back above the 1.13 handle.
From the UK, ahead of the BoE’s inflation report hearing, BoE’s MPC member, Kristin Forbes spoke at the Institute of Economic Affairs conference in London. She echoed the views of the other hawks in the BoE noting that the Central Bank should look through the current low inflation and start preparing the markets for a rate hike. A theme that was also aired by BoE’s Carney during the inflation report hearing noting that current pressures on inflation would likely to fade within the year although not specifically commenting on the future interest rate hike timetable. As expected, the BoE could merely look to maintain a neutral role at least until the UK elections are done with before we can see any surprise change of views from the Central Bank.
Heading into the US trading session, quite a few economic data releases are on the tap starting with the S&P/Case Shiller House price index, Richmond manufacturing Index, CB consumer confidence and flash services PMI. The main event however will be Janet Yellen’s testimony to the Senate Banking committee as the markets look towards any clues from the Fed Chief. Another event to watch out for will be Mario Draghi’s speech, but it is quite likely that Draghi could probably focus more on the Greece situation than the ECB’s monetary policy on the whole considering that Draghi will be meeting in Brussels tomorrow to testify on the ECB’s monetary policy actions so far.
For the moment, volatility is likely to creep up in the run up to the Fed Chief’s testimony both today and tomorrow.
