European FX Outlook: Time to listen to Draghi’s speech on Wednesday

What you need to know before markets open

  • Trump’s move to fire the State Secretary less than a week after chief economic advisor Gary Cohn resigned raises investors concerns about the US-led unilateral approach to trade, national security, and foreign affairs.
  • World’s most famous physicist Stephen Hawking died in at age 76 after selling more than 10 million copies of his signature book “A brief history of time”.
  •  Draghi’s speech and the US retail sales headline Wednesday in terms of the economic calendar.

Wednesday’s market moving events

  • China’s industrial production rose 7.2% y/y in January, beating the expectations.
  • China’s retail sales rose 9.7% y/y in January.
  • German final HICP inflation is set to rise 1.2% y/y in February.
  • ECB President Mario Draghi is set to speak at the  ECB conference hosted by the Institute for Monetary and Financial Stability, in Frankfurt at 8:00 GMT.
  • The Eurozone employment is expected to rise 0.3% Q/Q in the final quarter of 2017.
  • The Eurozone industrial production is seen falling -0.4% m/m in January while increasing 4.7% y/y.
  • The US retails sales control group is expected to rise 0.4% m/m in February after staying unchanged the previous month.
  • The US core PPI is forecast to rise 0.2% m/m in January while accelerating 2.5% y/y.
  • The US crude oil inventories are seen rising 2.2 million barrels.
  • The NZ GDP is expected to increase 0.8% Q/Q in the final quarter of 2017.

Major market movers

  • The US Dollar fell across the board after the US inflation failed to pick up and the US President fired unexpectedly State Secretary Rex Tillerson.
  •  Euro is on the watchlist failing to sustain gains above 1.2400 while Sterling is just below 1.4000.

Tuesday’s macro summary

  • French non-farm payroll rose 0.4% Q/Q in the final quarter of 2017.
  • Spanish inflation rose 0.1% m/m while rising 1.1% y/y in February.
  • Small business optimism index rose to 107.6 in February, the survey from the NFIB showed, reflecting the rising confidence in the US economy.
  • The OECD economic projections were revised upwards with the pace of expansion over the 2018-19 period expected to be faster than in 2017, but tensions are appearing that could threaten strong and sustainable medium-term growth. The UK is expected to see the slowest growth rate among G20 in 2018/2019.
  • ECB's Lane said there's no concern about current euro level.
  • The US core inflation is expected rose 1.8% y/y in February, at the unchanged pace from January. The overhead inflation in the US accelerated to 2.2% y/y in February in line with expectations.
  • The UK Chancellor of Exchequer Philip Hammond presented upwardly revised GDP growth forecasts in Spring Budget statement in the UK parliament but lowered the growth forecast for 2021 and 2022.
  • The US State Secretary Rex Tillerson was fired by US President Trump and will be replaced by current CIA director Mike Pompeo.
  • The Bank of Canada Governor Stephen Poloz said the Bank cannot take a mechanical approach to policy, even though interest rates likely to move higher over time.
  • The Bank of Japan meeting minutes confirmed BoJ’s conservative approach to changes of its policy saying that momentum toward hitting price target was being maintained, but the Bank should persistently pursue powerful monetary easing.


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