European FX Outlook: The Eurozone inflation is set to be subdued in February

What you need to know before markets open

• The Upper Chamber of Japan’s parliament confirmed appointments of Haruhiko Kuroda as the Governor and Masayoshi Amamiya and Masazumi Wakatabe as Deputy Governors of the Bank of Japan.
• The summit of Asian nations ASEAN and Australia rejects the US-led protectionist policies and says it is committed to free trade.
• According to media reports US President Trump has decided to remove his national security adviser Herbert Raymond McMaster.
• The Eurozone final inflation reading is scheduled for European morning session, with figures belittled by ECB President Mario Draghi speech this Tuesday in which he pointed out that inflation is currently way off the target to imply any kind of monetary policy consideration. For detail read my Preview here.

Friday’s market moving events

• German wholesale prices are seen rising 0.2% m/m while decelerating to 1.54% y/y in February.
• The Eurozone labor cost index is seen rising 1.8% y/y in Q4 2017.
• The Eurozone inflation is expected to rise 0.2% m/m while increasing by 1.2% y/y in February, unchanged from the previous month. The core inflation is expected to rise 1.0% in February. With inflation well below ECB’s target, no major market moves are expected. For detail read my Preview here.
• The US housing starts are seen decelerating to 1.28million while building permits are seen falling to 1.32 million in February.
• The Canadian manufacturing sales are seen falling -0.8% m/m in January.
• The US industrial production is expected to rise 0.3% m/m in February.

Major market movers

• The US Dollar recovered further on Thursday breaking below 1.2300 level against Euro while inching to 1.3900 against Sterling.
• The FX market is getting ready for next week’s FOMC meeting with the first rate hike under command of Jerome Powell being a sure shot for markets, so the statement and the dot-plot are likely to take the center-stage.

Thursday’s macro summary

• French inflation in February remained unchanged after falling  -0.1% m/m in January. Over the year, French inflation rose 1.2%.
• Swiss National Bank kept the monetary policy unchanged with Interest on sight deposits at the SNB is to remain at –0.75% and the target range for the three-month Libor unchanged at between –1.25% and –0.25%.
• The Empire State manufacturing index rose to the robust level of 22.5 in March.
• The US initial jobless claims reached 226 K in a week ending March 9, meeting the expectations.
• The Philadelphia Fed manufacturing index decelerated to 22.3 in March.
• The ADP employment survey for Canada rose by 32.7K in February, exceeding market expectations of 10K increase.