Talking Points:
- British Pound Looks to Wage Growth Figures to Inform BOE Rate Hike Bets
- US Dollar to Rise if Firm Core CPI Print Steepens Expected Fed Rates Path
- Aussie Dollar Slumps, Yen Outperforms as Risk Aversion Returns Overnight
UK labor-market data headlines the economic calendar in European hours. Jobless claims are expected to rise for a fifth consecutive month, but traders are likely to pay more attention to the pace of wage growth. Core inflation is unlikely to gain enough traction to overcome imported headwinds from commodity prices and the Eurozone without a meaningful pickup on this front.
The rate of increase in average weekly earnings is seen slowing for a second consecutive month, which could compound pressure on rate hike bets and weigh on the British Pound. Yesterday’s similarly-themed comments from BOE Governor Mark Carney have already punished the currency however, so follow-through may be limited.
Later in the day, the spotlight will to the US CPI report. The core year-on-year inflation rate is expected to rise to 2.1 percent, a three-year high. Leading survey data offers conflicting signals. A firm print may breathe new life into the Fed rate hike outlook, sending the US Dollar broadly higher.
While a soft result is likely to yield the opposite result, follow-through may be more limited than the alternative. Tightening bets have already floundered since the start of the year, with the 2016 rates path implied by Fed Funds futures registering as the most accommodative in three months. On balance, this seems to make a dovish surprise relatively less likely.
Risk aversion returned as the driving catalyst for currency markets in overnight trade. The sentiment-sensitive Australian and Canadian Dollars traded lower alongside Asian stock prices. The New Zealand Dollar likewise fell, but the move was instigated before risk-off momentum gathered steam and followed a disappointing set of CPI figures. The anti-risk Euro, Yen and Swiss Franc outperformed.
Gauge Trends and Spot Reversals in Leading Currencies with DailyFX SSI
Asia Session
GMT | CCY | EVENT | ACT | EXP | PREV |
21:45 | NZD | CPI (QoQ) (4Q) | -0.5% | -0.2% | 0.3% |
21:45 | NZD | CPI (YoY) (4Q) | 0.1% | 0.3% | 0.4% |
22:05 | NZD | REINZ House Sales (YoY) (DEC) | 3.5% | - | 8.5% |
23:30 | AUD | Westpac Consumer Conf Index (JAN) | 97.3 | - | 100.8 |
23:30 | AUD | Westpac Consumer Conf SA (MoM) (JAN) | -3.5% | - | -0.8% |
02:00 | CNY | Foreign Direct Investment (YoY) (DEC) | -5.8% | 3.1% | 1.9% |
European Session
GMT | CCY | EVENT | EXP | PREV | IMPACT |
07:00 | EUR | German PPI (MoM) (DEC) | -0.4% | -0.2% | Low |
07:00 | EUR | German PPI (YoY) (DEC) | -2.2% | -2.5% | Low |
07:00 | JPY | Convenience Store Sales (YoY) (DEC) | - | 0.9% | Low |
09:30 | GBP | Claimant Count Rate (DEC) | 2.3% | 2.3% | Medium |
09:30 | GBP | Jobless Claims Change (DEC) | 2.8k | 3.9k | Medium |
09:30 | GBP | Average Weekly Earnings (3M/YoY) (NOV) | 2.1% | 2.4% | Medium |
09:30 | GBP | Weekly Earnings ex Bonus (3M/YoY) (NOV) | 1.8% | 2.0% | Medium |
09:30 | GBP | ILO Unemployment Rate 3Mths (NOV) | 5.2% | 5.2% | Medium |
09:30 | GBP | Employment Change (3M/3M) (NOV) | 235k | 207k | Low |
10:00 | CHF | Credit Suisse ZEW Survey Expectations (JAN) | - | 16.6 | Low |
Critical Levels
CCY | Supp 3 | Supp 2 | Supp 1 | Pivot Point | Res 1 | Res 2 | Res 3 |
EUR/USD | 1.0744 | 1.0823 | 1.0866 | 1.0902 | 1.0945 | 1.0981 | 1.1060 |
GBP/USD | 1.3789 | 1.3999 | 1.4079 | 1.4209 | 1.4289 | 1.4419 | 1.4629 |
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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