European FX Outlook: Inflation in focus
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What you need to know before markets open:
- The US Dollar eased a bit on Thursday even with the US Treasury yields rising as the Federal Reserve Bank officials confirmed their path of gradual policy tightening.
- The UK senior cabinet members dining with the UK Prime Minister Theresa May brought no immediate headlines as the Westminster is getting ready for lengthy trade negotiations with the EU with no apparent ideological takeaway.
Friday’s market moving events
- Japan’s inflation excluding fresh food rose 0.9% over the year in January.
- German Q4 GDP is set to confirm flash estimate of 0.6% Q/Q growth rate that represents an increase of 2.3% y/y.
- The Eurozone inflation is expected to fall -1.6% m/m while rising 1.3% y/y in January.
- The Bank of Canada’s core inflation is expected to rise 0.7% m/m in January while rising 1.2% y/y.
Major market movers
- The US Dollar dropped on Thursday and it is expected to remain little changed on Friday as the benchmark 10-year US Treasury yields crawl up to the highest since 2014.
- The Eurozone’s and Canadian inflation will take a center stage on Friday.
Thursday’s macro summary
- Federal Reserve Vice Chairman for Supervision Randal Quarles said he is optimistic about the US economic outlook with investment picking up and fiscal stimulus driving the economy higher. Quarles said that gradual interest rate increases are “appropriate”.
- French business climate indicator decelerated to 109.1 in February from 110.8 in January.
- French harmonized CPI fell -0.1% m/m in February.
- German business climate indicator from IFO Institute decelerated sharply to 115.4 in February from 117.6 points in January.
- The second reading of the UK fourth-quarter GDP decelerated to 0.4% Q/Q and 1.4% y/y, down from preliminary reported of 0.5% Q/Q and 1.5% y/y.
- The ECB monetary policy meeting minutes are due.
- The US initial jobless claims are expected to reach 230K in the week ending February 16.
- Canada’s retail sales fell -0.8% m/m in December while falling -1.8% m/m after excluding auto sales.
- Dallas Federal Reserve Bank President Robert Kaplan considers three rate hikes in 2018 “reasonable”.
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