American FX Outlook: Waiting for inflation Godot to decelerate in the US

What you need to know before markets open:

  • The set of European macro data on both growth and inflation came out in line with expectations as the Eurozone GDP rose 2.7% in final quarter of 2017.
  • German Bundesbank’s conference on future of money headlines officials from SNB and ECB, but did not deliver any market moving messages.
  • US inflation headlines the day as investors worry that with inflation back in play US equities might resume the downward spiral.

Thursday’s market moving events

  • The US CPI is expected to rise 0.3% m/m in January while decelerating to 1.9% y/y, the core inflation is expected to decelerate from 1.9% in December to 1.7% y/y in January.
  • The US retail sales are expected to rise 0.2% m/m with the core retail sale seen rising 0.4% m/m in January.

Major market movers

  • The US Dollar resumed the days of continuous weakening, although it fell to 15-month low vs Yen earlier on Wednesday.
  • US retail sales and inflation data are scheduled for Wednesday and inflation are of a key interest for the markets as the reappearance of higher inflation might end the era of equities super rise weighing on the US Dollar.

Earlier in Asia/Europe

  • German inflation fell expected -0.7% m/m in January while rising 1.6% y/y.
  • German GDP also rose expected 0.6% Q/Q in the final quarter of 2017 while increasing 2.3% y/y.
  • German Bundesbank president Jens Weidmann, Swiss SNB Zurbrügg and ECB’s Mersch all speak at the  Bundesbank Cash Symposium with no market-moving messages.
  • The Eurozone Q4 GDP rose 0.6% Q/Q while rising 2.7% y/y, meeting market expectations
  • The Eurozone industrial production rose 0.4% m/m in December while rising 5.2% y/y.
  • The Bank of England regional agents' report recruitment difficulties had remained at an elevated level while wage growth had picked up. The agents also reported that investment intentions had remained positive, but mainly reflected investment to maintain business activity.


 

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