The Euro is unlikely to find follow-through in German ZEW data as Greece worries preoccupy investors ahead of the weekend’s Eurozone summit.
Talking Points:
Euro Unlikely to Find Follow-Through in German ZEW Report
Commodity Currencies, US Dollar Respond to Policy Outlooks
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Germany’s ZEW Survey of analyst confidence headlines the economic calendar in European trading hours. The forward-looking Expectations index is expected to rise to 55.3, putting sentiment at the highest level in 14 months. A rosy outcome seems unlikely to offer a meaningful lift to the Euro however considering its limited implications for near-term ECB monetary policy.
The central bank seems to be on auto-pilot for the time being as it monitors the impact of its new €60/month QE effort. Looming Greece-linked event risk by way of the upcoming Eurozone finance ministers’ meeting may likewise discourage commitment to a directional bias from investors. In fact, scheduled commentary from Danièle Nouy, the President of the ECB’s Supervisory Council, may easily overshadow the ZEW report if she opts to opine on the ability of Eurozone banks to withstand turbulence from an adverse Greece scenario.
The Australian, Canadian and New Zealand Dollars underperformed in overnight trade – posting sizable declines against their major counterparts – while the US Dollar traded broadly higher. The moves in all four currencies tracked intraday price action in 10-year US Treasury bond futures. The greenback rose alongside prices for contracts tracking the US debt benchmark while the so-called “commodity” dollars declined inversely of them.
The move may have reflected demand for USD-based assets after RBA and BOC Governors Stevens and Poloz played down rate hike probabilities in a pair of separate speeches in New York earlier in the day. Such guidance stands in contrast to that of the Federal Reserve, where traders continue to expect at least one interest rate hike in 2015. Fed funds futures imply the first post-QE increase in the overnight lending rate will occur by October.
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