€ Euro at risk if Spanish GDP, slower Inflation Drive ECB rate cut Paris

Discussion points
Euro at risk if Spanish, slower GDP Inflation Drive ECB rate cut Paris Australian Dollar further as traders Set views on the report of domestic product gross Spain of RBA meeting headlines the economic calendar European hours. Expectations call for output decrease of 0.4% in the first quarter in the three months through December, marking the second consecutive print in negative territory and put the country in a technical recession. Merchants are turning to the result in the context of the debt crisis in the eurozone in the widespread fears that the Spain is bound to follow the Greece on the road to insolvency. A low reading is likely to keep investors fearing that a recession will cut the Government tax take and limit the scope of additional austerity, derail deficit reduction efforts.
Also, a preliminary estimate of eurozone Consumer Price Index in April reading should show that inflation slowed to an annual rate of 2.5%, the lowest in eight months. With confirmation of the recession in Spain, fourth largest economy of the block of the currency, the result can begin to plant the seeds of the ECB rates on the horizon. Needless to say that these results could threaten the Euro. On the front of the issue, the France is the sale of EUR 8 billion in-91, 154 and 364-day bills. As usual, market monitor average yield and readings of the bid to cover the signs of stress, same funding short tenor of debt on offer may somewhat limit the potential of fireworks.
The Australian Dollar lower overnight as traders seemed to come from the decision of regional interest for Africa of tomorrow, where policy makers are widely expected to reduce the cost of borrowing by 25 points of reference. Set of economic data of the day reinforced pressure sale. TD Securities inflation indicator developed growth rates annualized price to 1.9 percent in April, marking the second month below 2-3% range of the RBA. Separately, the growth of credit to the private sector on year slows to 3.4%, the lowest in six months. A minimum of three months on the economic index of China which has even undermined the Aussie in the fears that the slowdown of the partner of the Australia top of page export conditions will convert faltering growth and finally rate RBA deep cuts in the coming months.
Asia session: What happened
Balance commerciale 12mth CDA (NZ$) (MAR)
Hometrack Housing Survey (YoY) (APR)
Hometrack Housing Survey (MoM) (APR)
TD Securities Inflation (MoM) (APR)
TD Securities Inflation (YoY) (APR)
NBNZ (APR) business confidence
HIA new sales at home (MoM) (MAR)
Private sector credit (YoY) (MAR)
Private sector credit (MoM) (MAR)
Session of the euro: what to expect
Spanish GDP (constant) (YoY) (1 q, P)
Spanish GDP (constant) (QoQ) (1 q, P)
Eurozone M3 s.a. (AVG. 3mth) (MAR)
Estimate of the ICC to the eurozone (YoY) (APR)
IPC Italy (tobacco including NIC) (MoM) (APR, P)
IPC Italy (tobacco including NIC) (YoY) (APR, P)
Italian ICC - EU harmonized (MoM) (APR, P)
Italian ICC - EU harmonized (YoY) (APR, P)
France sell billions € in vouchers 91-364 day
Critical levels

Canadian Dollar to Hold Range on Slower Consumption, BoC Testimony

21 April 2012 00: 37 GMT

 

Fundamental Forecast for Canadian Dollar: Neutral

The Canadian dollar pared the decline from earlier this month as the Bank of Canada raised its fundamental assessment for the region, but the loonie may struggle to hold its ground next week as the economic docket is expected to reinforce a weakened outlook for growth. As market participants see a slower rate of private consumption in February, a slew of dismal developments could push the USDCAD back towards parity, and the pair may threaten the range-bound price action carried over from earlier this year should the data dampens the scope for a rate hike.

Indeed, the BoC talked up speculation for higher interest rates as policy makers now see the economy back at full-capacity operation in the first-half of 2013, and Credit Switzerland overnight index swaps already reflect expectations for higher borrowing costs as market participants start to price a rate hikes for the next 12-months. However, we may see Governor Mark Carney endorse a one-time move in order to bring down the marked expansion in home-equity credit lines, and the central bank head may strongly opposed for a series of rate hikes as the record rise in household indebtedness presents a major threat to the recovery. As Mr. Carney is scheduled to testify in front of the house of Commons Finance Committee and the Senate Banking Committee next week, the governor may strike a more balanced tone for monetary policy, and we may see the BoC preserve its wait-and-see approach for a prolonged period of time as the economic recovery continues to be driven by the ongoing rise in household borrowing.

As the USDCAD maintains the range-bound price action from earlier this year, we should see even the move back towards the top of its range (0. 9900-1. 0050), but the FOMC interest rate decision may spark whipsaw-like price action in the exchange rate as market participants weigh the prospects for future policy. Should the Fed signal an increased willingness to move on rates, a shift in the policy outlook could produce a bullish breakout in the exchange rate as the BoC lags behind, but we may see the dollar-loonie continues to track sideways next week if the committee keeps the door open to expand monetary policy further. -DS

^^ British Pound Outlook Threatened By Slower Growth, Inflation ^^

Fundamental Forecast for British Pound: Bullish

• GBPUSD: Looking for Short Entry Opportunities
• GBPUSD Corrective Advance Expected
• British Pound Likely to Fall Further

The British Pound bounced back during the holiday trade to maintain the upward trend from earlier this year, but we may see the sterling struggle next week as the economic docket is expected to reinforce a weakened outlook for the U.K. As the event risks on tap for the following week are anticipated to dampen the prospects for growth and inflation, a slew of dismal developments could spark a sharp selloff in the exchange rate, and we may scale back our bullish forecast for the GBPUSD should the exchange rate slip back below interim support around 1.5800.

At the same time, we will be closely watching the fresh batch of commentary from Bank of England official Adam Posen as he continues to push for another GBP 25B in quantitative easing, but we may see the board member soften his dovish tone for monetary policy as the central bank anticipates to see a more robust recovery later this year. Although the Monetary Policy Committee refrained from releasing a policy statement after maintaining its current policy stance in April, the board said it would take another month to complete the GBP325B in bond purchases, but it seems as though the MPC is looking to conclude its easing cycle this year as the committee now see a limited risk of undershooting the 2% target for inflation. Indeed, the shift in the policy outlook should continue to prop up the sterling as market participants scale back bets for more quantitative easing, and we may see the British Pound outperform against its major counterparts as interest rate expectations pick up.

As the GBPUSD appears to be carving out a higher low around 1.5800, the pair could be building a base for a sharp move to the upside, and we may see the exchange rate make another run at 1.6000 should the developments coming out of the U.K. dampen expectations for more QE. In turn, it looks as though the upward trending channel will continue to take shape in April, and we will maintain a bullish outlook for the British Pound as the BoE raises its fundamental assessment for the region. – DS