FOREX-Euro hurt by Greek uncertainty, dollar helped by rate outlook

* Dollar firmer vs yen and euro

* Euro weighed down by uncertainty over Greece

* Yellen’s message on gradual tightening provides no fresh impetus (Recasts, fresh quotes, updates prices)

By Anirban Nag

LONDON, March 30 (Reuters) – The euro fell on Monday, hurt by uncertainty over whether Greece and its international creditors will be able to strike a deal that will help Athens secure funding before it runs out of money by April 20.

Talks continued through the weekend on reforms to unlock loans and Athens sounded an upbeat tone, but the lenders said it could take several more days before a proper list of measures was ready.

The dollar rose broadly, helped by comments from Federal Reserve chair Janet Yellen, who underscored the view that the Fed is likely to start raising interest rates gradually later this year.

The dollar edged up 0.3 percent to 119.50 yen, while the euro fell 0.6 percent to $ 1.0830, having in the last two weeks pulled away from a 12-year trough of $ 1.0457.

“Even though euro short positions are at record highs, given the Greek uncertainty and the bias for more monetary injection by the European Central Bank, the path for least resistance is a lower euro/dollar,” said Jeremy Stretch, head of currency strategy at CIBC World Markets.

“Unless the euro drops below $ 1.0770 we could see ranged trading, but with the Fed still looking to raise rates, we could see conditions later this week that are more helpful for overall dollar strength.”

U.S. jobs data on Friday will be a key event for the dollar this week and a robust report could see investors position for tighter monetary policy sooner rather than later.

In a speech on Friday, Yellen outlined the case for a ‘gradualist approach’ to rate hikes, in comments mirroring those at the post-FOMC meeting on March 18. She signalled the Fed will likely start raising borrowing costs later this year but said policy tightening could “speed up, slow down, pause, or even reverse course” depending on actual and expected developments in the economy.

“Yellen went to great length to detail why rate hikes would not be rushed and ultimately may not reach levels previously considered to be ‘normal’,” said Ray Attrill, global co-head of FX strategy at National Australia Bank.

“Our take is that while rates may rise sooner and faster than current market pricing, they are more likely to undershoot than overshoot the Fed’s latest median ‘dot point’ trajectory.”

Still, the diverging rate pathways between the Fed and most of the developed world meant the dollar should stay supported.

“Our view of the U.S. dollar remains broadly positive and we have always viewed that the correction of the past two weeks in the U.S. dollar is temporary,” said Heng Koon How, senior FX strategist for private banking and wealth management at Credit Suisse in Singapore.

(Additional reporting by Masayuki Kitano; Editing by Susan Fenton)

FOREX-Dollar supported even as Yellen drives home message of patience

* Dollar firmer vs yen and euro

* Yellen’s message on gradual tightening provides no fresh impetus

* Commodity currencies continue to underperform (Adds comments, updates prices)

By Ian Chua and Masayuki Kitano

SYDNEY/SINGAPORE, March 30 (Reuters) – The dollar inched higher versus the yen and euro on Monday after the head of the U.S. Federal Reserve underscored the view that the Fed is likely to start raising interest rates gradually later this year.

The dollar edged up 0.1 percent to 119.24 yen. It has fallen more than 2 percent from a near eight-year peak of 122.04 set early this month.

The euro slipped 0.2 percent to $ 1.0873, having in the last two weeks pulled up from a 12-year trough of $ 1.0457.

In a highly anticipated speech on Friday, Fed Chair Janet Yellen outlined the case for a ‘gradualist approach’ to rate hikes, in comments mirroring those at the post-FOMC meeting on March 18.

She said policy tightening could “speed up, slow down, pause, or even reverse course” depending on actual and expected developments in the economy.

“Yellen went to great length to detail why rate hikes would not be rushed and ultimately may not reach levels previously considered to be ‘normal’,” said Ray Attrill, global co-head of FX strategy at National Australia Bank.

“Our take is that while rates may rise sooner and faster than current market pricing, they are more likely to undershoot than overshoot the Fed’s latest median ‘dot point’ trajectory.”

The diverging interest rate pathways between the Fed and most of the developed world meant that the dollar should in general stay supported.

“Our view of the U.S. dollar remains broadly positive and we have always viewed that the correction of the past two weeks in the U.S. dollar is temporary,” said Heng Koon How, senior FX strategist for private banking and wealth management at Credit Suisse in Singapore.

“We expect the Fed to start hiking rates possibly by the September FOMC and the process will likely be gradual,” he said, adding that the dollar would probably stay strong heading into the start of the Fed’s policy tightening cycle.

A key event for the dollar this week is U.S. jobs data on Friday.

Commodity currencies edged lower, partly unsettled by further falls in oil and iron ore prices last Friday, when oil prices slid 5 percent. On Monday, benchmark Brent crude oil futures slipped 0.5 percent to $ 56.13 a barrel.

The Aussie eased 0.3 percent to $ 0.7729, continuing to retreat from a two-month peak of $ 0.7939 set a week ago. It was nearing a six-year trough of $ 0.7561 plumbed early this month.

(Editing by Eric Walsh & Kim Coghill)

Currencies: Dollar sees largest two-week decline against euro since 2012

NEW YORK (MarketWatch)—The U.S. dollar booked its largest two-week decline against the euro since September 2012 on Friday, sliding on expectations that the Federal Reserve will begin raising interest rates later, and more gradually, than market participants had previously anticipated.

The euro EURUSD, +0.04%  traded at $ 1.0886, compared with $ 1.0880 late Thursday. The dollar traded at 119.19 yen, compared with ¥119.19 level seen late Thursday.

The dollar lost about 3.7% against the euro over the last two weeks. That’s the largest percentage decline since the week ending on Sept. 14, 2012, shortly after the European Central Bank introduced its program of outright monetary transactions, which helped restore investors’ confidence in eurozone sovereign debt.

Still, the euro is down more than 10% versus the dollar since Dec. 31.

Federal Reserve Chairwoman Janet Yellen spoke at a conference hosted by the Federal Reserve Bank of San Francisco, but her words had little impact on the dollar. She reiterated the view, established at last week’s Fed policy meeting, that a rate hike would happen some time this year, and that the central bank is in no hurry to raise interest rates.

Read: Fed’s Yellen says rate hikes—but not too many—are coming

Earlier in the session, the Commerce Department released its final revision of fourth-quarter gross domestic product growth. It showed the U.S. economy grew 2.2% in the last three months of 2014, unchanged from the previous estimate. Economists polled by MarketWatch had expected 2.4% growth.

Many analysts had expected a moderation in fourth-quarter GDP growth after the annualized growth rate for the third quarter rose to 5%, the highest reading since the third quarter of 2003.

“Anyone who thought the U.S. economy was going to continue to pump out such outstanding figures was too ambitious,” Jameel Ahmad, chief market analyst at FXTM, said. Growth of “2.2% for a developed economy, this is still a very strong figure. If anything it points to the fact that the U.S. economy is continuing to tick along nicely.”

The U.S. economy saw strong readings on consumer-price inflation and new-home sales earlier in the week, but the durable-goods orders report, released on Wednesday, was seen supporting the notion of delayed rate hikes.

“Core durable goods orders have fallen for 5 months in a row, and hopes of a significant rebound in capital spending and fixed investment continue to fail to materialize,” said Kit Juckes, global strategist at Société Générale. “Add that to the lack of wage or consumer price pressures, and the arguments for an aggressive or protracted rate-hiking cycle remain absent.”

The ICE U.S. Dollar Index DXY, -0.03% which gauges the dollar’s strength against six major currencies, was down EURUSD, +0.04%  slightly at 97.39.

The pound GBPUSD, +0.22%  traded at $ 1.4907, compared with $ 1.4853 Thursday.

Asian markets mostly welcome Fed's cautious rate talk

Most Asian equity markets rallied Thursday after comments by the US Federal Reserve cooled expectations of an early rate hike, while the euro and yen retreated against the dollar after racking up big gains in New York.

While the US central bank opened the door for a rise after six years of zero percent rates, it lowered its forecasts for economic growth and inflation and stressed it would remain cautious before making any move.

News that the Fed is in no hurry to depart from the loose monetary policy that has supported shares sent Wall Street surging, providing a strong platform for Asian indexes.

At the close of trade Sydney was 1.86 percent higher, adding 108.5 points to 5,950.8 while Seoul ended up 0.47 percent, or 9.44 points, at 2,037.89.

Hong Kong rallied 1.45 percent, or 348.81 points, to 24,468.89.

However, Tokyo sank 0.35 percent, or 67.92 points, to close at 19,476.56 as exporters were hurt by the strengthening yen. Shanghai retreated 0.31 percent in late trade after rising almost nine percent in a six-session winning streak.

After a two-day policy meeting, the Fed issued a statement that removed a pledge to remain “patient” on raising interest rates, signalling a possible mid-year rate increase.

But bank chair Janet Yellen stressed growth prospects were more muted than three months ago, despite strong increases in jobs creation. She noted consumer spending has slipped, inflation has declined, wages are flat, and the stronger dollar has hurt US exports.

The policy committee lowered its rate outlook to 0.5-0.75 percent for the end of this year, from 1.0 percent previously, while also reducing its 2016 forecast to 1.75-2.5 percent from 2.5 percent.

“Just because we removed the word patient from the statement doesn’t mean we’re going to be impatient,” Yellen told reporters.

– Dollar fights back –

The news sent the dollar tumbling and provided much-needed relief for the euro, which has been hammered by the European Central Bank’s new stimulus programme.

However, on Thursday the greenback began to recover, buying 120.65 yen against 120.09 yen in New York, although it is still well down from the 121.35 yen level in Tokyo earlier Wednesday.

The euro changed hands at $ 1.0685 against $ 1.0871, but is well up from the $ 1.059 earlier Wednesday.

At one point in New York the dollar had tumbled to 119.57 yen and the euro was at $ 1.101.

“It’s difficult to see rate hikes in June, and I expect the timing to keep being pushed back,” Mitsushige Akino, an executive officer at Ichiyoshi Asset Management Co. in Tokyo, told Bloomberg News.

“Looking at the US’s inflation rates, and the fact that wages haven’t risen despite the good headline jobs numbers, the US is not in a state to hurry into rate hikes.”

Also in New York, the Dow climbed 1.27 percent, the S&P 500 jumped 1.21 percent and the Nasdaq advanced 0.92 percent.

Oil prices were lower in Asian trade after jumping in New York in reaction to the Fed news. US benchmark West Texas Intermediate for April delivery shed $ 1.46 to $ 43.20 while Brent crude for May fell 74 cents to $ 55.17.

On Wednesday WTI gained $ 1.20 in US trade and Brent climbed $ 2.40.

Gold fetched $ 1,164.38 against $ 1,153.82 late Wednesday.

In other markets:

— Mumbai fell 0.53 percent, or 152.45 points, to end at 28,469.67.

Axis Bank fell 2.50 percent to 564.10 rupees, while Gas Authority of India Limited rose 2.19 percent to 390.05 rupees.

— Singapore rose 0.73 percent, or 24.41 points, to 3,386.16.

Oversea-Chinese Banking Corporation gained 1.27 percent to Sg$ 10.36 while oil rig maker Keppel Corp rose 0.81 percent to Sg$ 8.69.

— Bangkok was flat, edging up 0.04 percent, or 0.63 points, to 1,532.13.

Kasikorn Bank rose 1.77 percent to 230.00 baht, while Siam City Cement fell 1.00 percent to 396.00 baht.

— Kuala Lumpur’s main index closed 0.64 percent, or 11.56 points higher, at 1,809.13.

Public Bank added 0.76 percent to 18.64 ringgit, Sime Darby rose 0.22 percent to 9.30, while Tenaga Nasional lost 0.55 percent to 14.58 ringgit.

— Jakarta ended up 0.75 percent, or 40.70 points, at 5,453.85.

Auto giant Astra International rose 0.94 percent to 8,050 rupiah, while Matahari Putra Prima, which runs a variety of shops, lost 3.75 percent to close at 4,230 rupiah.

— Taipei added 0.86 percent, or 83.30 points, to 9,736.73.

Smartphone maker HTC climbed 1.07 percent to Tw$ 141.5 while Taiwan Semiconductor Manufacturing Co. was 0.33 percent higher at Tw$ 154.0.

— Wellington rose 0.22 percent, or 12.74 points, to 5,859.40.

Air New Zealand was up 0.71 percent at NZ$ 2.82 and Chorus lifted 1.56 percent to NZ$ 2.93.

— Manila closed 0.75 percent higher, adding 57.97 points to 7,814.55.

Philippine Long Distance Telephone rose 2.22 percent to 2,850.00 pesos and Ayala Land gained 1.47 percent to 37.95 pesos, while Alliance Global Group advanced 2.06 percent to 27.20 pesos.

FOREX-Euro gets the deflation jitters, dollar climbs

* Euro shaky after falling towards $ 1.1800

* Deflationary pressure in euro zone argues for ECB action

* Fed minutes offer no new clues on rate hike timing

By Ian Chua

SYDNEY, Jan 8 (Reuters) – The euro held near a nine-year low early on Thursday, having been in the firing line again as investors wagered the European Central Bank would have to take bolder stimulus steps to combat growing deflationary pressures in the zone.

The euro fell as far as $ 1.1802, putting the 2005 trough of $ 1.1640 in reach of speculative sellers. It has since edged back to $ 1.1835.

The common currency initially dipped against the yen to a fresh two-month low of 140.58. It has since popped back above 141.00 as gains in global stocks dampened demand for the safe-haven Japanese currency.

Data on Wednesday showed consumer prices in the euro zone fell in December from a year earlier, marking the first annual decline since 2009. That only cemented market expectations the ECB will launch a bond buying program at its policy meeting on Jan. 22.

In contrast, the Federal Reserve is still expected to lift interest rates, although the timing remains unclear. Minutes of the December meeting offered no new clues on when the Fed will move.

“The focus now should shift back to the data, with the next few months of releases key in determining whether rate hikes will begin in June as we, along with most FOMC members, expect,” analysts at BNP Paribas wrote in a note to clients.

The dollar climbed back above 119.00 yen, pulling away from a three-week trough of 118.36 plumbed on Tuesday.

Weakness in the euro kept the dollar index aloft at nine-year highs. The index last traded at 92.003, near the peak of 92.265 set overnight.

Also on the menu for bears was sterling, which sank to its lowest in over 17 months after growth in Britain’s dominant services sector slowed last month to its weakest since May 2013.

The pound plumbed as low as $ 1.5055 and last changed hands at $ 1.5112.

Both the Australian and Canadian dollars succumbed to selling pressure as well, but managed to stage a rebound from six-year troughs.

The Aussie traded at $ 0.8076, having earlier slid to $ 0.8033. Its Canadian peer bounced back to C$ 1.1822 per USD from C$ 1.1875.

There is little in the way of market-moving data in Asia, leaving the focus on European data as well as an interest rate decision by the Bank of England.

(Editing by Chris Reese)

Dollar edges up, risk aversion, dovish rate hike outlook weigh

* Dollar/yen hits 1-mth low before bouncing on bargain-hunting

* Germany’s ZEW index in focus amid global growth worries

* Aussie gains as iron ore prices stabilise tentatively (Adds details, quotes)

By Shinichi Saoshiro

TOKYO, Oct 14 (Reuters) – The dollar rebounded modestly against the yen and euro on Tuesday following steep falls overnight, although risk aversion amid the fall in global equities and uncertainty on the timing of Federal Reserve interest rate hikes put a firm cap on the currency.

The dollar crawled up 0.4 percent to 107.235, but remained in close range of a one-month low of 106.76 hit earlier in the session.

The euro slipped 0.2 percent to $ 1.2726 after surging nearly one percent overnight.

The greenback suffered a heavy blow overnight against the safe-haven yen as Wall Street took large hits, with the S&P 500 sliding to a five-month low.

“There is some bargain hunting for the dollar but it looks poised to test further lows against the yen for the time being. With U.S. stocks falling this much, risk-off bids for the yen stand out,” said Shinichiro Kadota, chief Japan FX strategist at Barclays Bank in Tokyo.

The dollar also attracted demand when global growth concerns began to sour a while back, but sliding U.S. equities have accentuated the ‘risk-off’ bids for the yen, Kadota said.

The Tokyo financial markets tried to take stock of recent developments after the Japanese markets were closed on Monday for a public holiday.

Weak signals from Germany, the euro zone’s largest economy, and signs of uneven growth in China have contributed to recent global growth concerns.

Global equities slid in the face of these concerns, with the widening Ebola epidemic further undermining risk sentiment.

Federal Reserve officials warned at the weekend that if the global recovery stumbled, it could delay an increase in U.S. interest rates.

Expected divergence between U.S. monetary policy and those of the euro zone and Japan was a key ingredient fuelling the dollar’s surge to a two-year high versus the euro and six-year peak against the yen at the start of the month.

With Germany’s economic outlook and its potential impact on the Fed’s views on the global economy in recent focus, the currency market will scrutinise Germany’s ZEW sentiment index and euro zone industrial output due later in the session.

Market watchers said the indicators could hurt both dollar and the euro, which had pulled away from a two-year low of $ 1.2500 hit early this month at the expense of a flagging dollar.

“Deteriorating economic conditions are to be expected, but worse-than-forecast numbers will weaken the euro and also exacerbate the dollar/yen fall by taking equities and U.S. yields lower,” said Masafumi Yamamoto, market strategist for Praevidentia Strategy in Tokyo.

The Australian dollar gained 0.4 percent to $ 0.8807 on a tentative stabilisation in the price of iron ore, the country’s biggest export earner.

The Aussie had neared a four-year low of $ 0.8642 on Monday as a spike in volatility caused by the selloff in global equities encouraged investors to unwind popular carry trades.

Highlighting the defensive position the U.S. currency was still stuck in, the dollar index was down 0.3 percent at 85.309, well below the four-year high of 86.746 struck earlier this month when a Fed rate hike in the near term seemed more likely.

(Editing by Eric Meijer)

Sterling struggles as UK rate hikes put into doubt

* Sterling down 0.5 pct vs euro after IMF

* Inflation and wage growth data eyed

* Carney says euro zone weakness will not dictate UK policy

* British 10-year gilt yields touch 16-month low

By Jemima Kelly

LONDON, Oct 13 (Reuters) – Sterling fell towards a four-week low against the euro on Monday on growing expectations that a global slowdown will lead to the Bank of England delaying interest rate rises until well into 2015.

Traders said UK inflation and wage growth data — due on Tuesday and Wednesday respectively — would be crucial, with any disappointment likely to further disappoint rate hike hopes and send the pound lower.

The failure of real wages to pick up, in turn reducing the risk of a bounce in inflation, has been the big hole in the argument for raising UK rates so far.

Money market rates have already shown investors backing away from the expectation of a BoE rate increase by the end of the year — a bet that drove sterling to a six-year peak against the dollar in July — as numbers from the UK have raised the prospect of an end-of-year economic slowdown.

“I would expect sterling to come under a bit of pressure ahead of tomorrow’s inflation data,” Western Union’s UK market analyst, Nawaz Ali, said.

“The next couple of days — the inflation data and the wage growth data — are going to give us a lot of answers to questions on BoE policy and the pound’s outlook from here.”

The euro strengthened by over half a percent against the pound on Monday to 78.97 pence, close to a 3-1/2 week high of 79 pence. That came as the yield gap between two-year British gilts and German bunds narrowed to its lowest in two months.

Sterling also weakened against the dollar, falling 0.1 percent to $ 1.6060. Sterling’s losses came despite a sluggish dollar which fell broadly after dovish comments from a host of U.S. Federal Reserve officials.

At a meeting in Washington over the weekend, financial leaders took stock of a weaker economic outlook and Fed officials said U.S. rate hikes could be delayed if global growth is weaker than anticipated.

But BoE Governor Mark Carney said on Monday that weakness in the euro zone — fast becoming the world’s central economic concern again — would not dictate UK monetary policy, and would only be one factor the bank considers when deciding when to raise interest rates.

“I still don’t like sterling,” Societe Generale (Paris: FR0000130809 – news) macro strategist, Kit Juckes, said, noting that he thought it likely that markets will have pushed back their expectations of a rate increase before May by the end of the week, after the inflation and wage data had been digested.


Rate hike jitters also hit gilt yields, with British 10-year government bond yields falling to a 16-month low.

Yields on 10-year debt were down more than 4 basis points at 2.18 percent by 1435 GMT, adding to last week’s 19-basis-point drop, which was the largest weekly decline in more than a year. Earlier on Monday the yield was as low as 2.174 percent, its lowest since June 2013.

Investors were also focussing more on political risk in Britain.

Latest polling showed support for anti-EU party UKIP at 25 percent and the party’s leader said he would demand an immediate referendum on European Union membership as the price of supporting any coalition government after elections next May.

“I think most people still think this is a temporary phenomena that will not prove be as important a factor in the elections as it looks at the moment,” said a dealer with one London-based bank.

“But there’s no denying the nerves it will stir up in the run-in if support for UKIP does not fall off.” (Additional reporing by William Schomberg and Patrick Graham; Editing by Louise Ireland)

FOREX-Dollar climbs to six-year peak vs yen on Fed rate forecasts

* Fed rate projections show faster rate hikes

* But Fed statement expresses labor market concerns (Recasts following Fed statement, adds comment, updates prices, changes byline)

By Gertrude Chavez-Dreyfuss

NEW YORK, Sept 17 (Reuters) – The dollar jumped to a six-year high against the yen on Wednesday while the euro tumbled from five-month peaks after forecasts from the Federal Reserve showed a faster pace of rate hikes over the next few years than initially projected in June.

The Fed’s statement after a two-day policy meeting remained cautious, however, sticking to its low interest rate pledge for a “considerable time” and expressing concern about slack in the labor market, but currency investors focused on the Fed’s interest rate projections.

For the end of next year, the median of the projections was 1.375 percent, compared to 1.125 percent in June, while the end-2016 projection moved up to 2.875 percent from 2.50 percent. For 2017, the median stood at 3.75 percent.

“The dollar is reacting to the interest rate forecasts, which were higher,” said Vassili Serebriakov, currency strategist, at BNP Paribas in New York. “The Fed statement, on the other hand, was pretty dovish, but the market has already priced that in following reports from yesterday.”

High interest rates burnish the allure of dollar-denominated assets.

There were also two dissenters to the Fed decision to keep its near-zero rate pledge. Dallas Federal Reserve Bank President Richard Fisher and Philadelphia Fed chief Charles Plosser argued that the guidance on rates could tie the central bank’s hands if it felt it had to move more quickly to tighten monetary policy.

In mid-afternoon trading, the dollar surged to 108.10 yen , the highest since mid-September 2008, and was last at 107.78, up 0.7 percent.

The euro slid to $ 1.2947, down 0.1 percent, after hitting a five-month high of $ 1.2981.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by James Dalgleish)

Dollar Needs Inflation to Sustain Break from Equities, Yields

Talking Points:

  • Dollar Needs Inflation to Sustain Break from Equities, Yields
  • British Pound Faces Another Wave of Potential Volatility with CPI
  • New Zealand Dollar Drops as Inflation Readings Further Cut Rate Forecast

Dollar Needs Inflation to Sustain Break from Equities, Yields

The Dollar opened the new trading week with a mixed performance. Between modest gains against the Euro (0.3 percent) and losses versus the Pound (0.2 percent), the Dow Jones FXCM Dollar Index (ticker = USDollar) closed out Monday virtually unchanged. This is a familiar performance for the greenback. It has struggled to find bearing and momentum throughout August. The lack of performance is remarkable when we put its fundamentals into context. Considering volatility in the FX market and system-wide has cooled materially from the jump experienced just two weeks ago and Treasury yields continue to bleed rate speculation; the assumption would be that the benchmark should be in full retreat. The currency’s endurance likely has a lot to do with the burgeoning trouble experienced by so many of its counterparts – Euro growth, Pound and New Zealand dollar rates, and Yen risk trends. Yet, that relative and indirect performance offers little hope for momentum.

In need of an intrinsic fundamental driver, the dollar is coming into key event risk today. The July consumer inflation (CPI) data is due at 12:30 GMT. While this data could theoretically spur a shift in broader speculative appetites – by leveraging a global response to the implications of global stimulus programs winding down – its more direct impact will come through reshaping Fed rate expectations. US Treasury yields have been in retreat for weeks and implied yield forecasts derived from Fed Funds futures trade at heavy discounts to the FOMC’s own projections. This suggests we are looking at an asymmetrical response opportunity. A ‘weak’ inflation outcome could weigh the dollar; but already bridled with skepticism, the rate impact would be moderated. Alternatively, if the CPI reading beats (headline forecast is 2.0 percent, core 1.9 percent), closing the market’s discount could translate into a rally.

British Pound Faces Another Wave of Potential Volatility with CPI

If the British Pound’s reaction to last week’s Bank of England Quarterly Inflation Report was any indication, the upcoming UK event risk can elicit a serious move from the currency. Ahead, we have a broad range of inflation updates from for the economy. All due at 8:30 GMT, we expect price gauges for the consumer basket (CPI), factory and production levels (PPI), retailer and distribution level (RPI) and the housing market (ONS). When it comes to gauging the time frame of rate hikes for the BoE or any other major central bank, inflation pressures are key. An improved economy and labor situation reduce the need for extraordinary support through stimulus measures, but actually tightening policy typically requires a price motivation. Yet, despite the market’s aggressive rate forecasting, inflation has not taken root. And, this past month, traders have started to adjust for that realization. The market will make a qualitative assessment on all the data, but most focus on the CPI.

Euro Slides as August Economic Surveys Show Further Drop in Growth

Just last week, we were given a troubling update on the Euro-area economy. Second quarter GDP figures showed a general moderation of growth for the region with particular struggles noted in the important ‘core’ members. Yet, some may have found solace in the figures being dated and not indicative of the new ECB stimulus. Well, the economic health survey’s for key Eurozone economies conducted by Bloomberg shows that optimism is short supply. Particular forecast downgrades were noted for Germany and France. Will yields succumb?

New Zealand Dollar Drops as Inflation Readings Further Cut Rate Forecast

Interest rate expectations for the New Zealand dollar have more than cooled – they are collapsing . This morning, swaps are pricing in only 33 bps of rate hikes from the RBNZover the coming 12 months. A month ago, that forecast was 90 bps and six months ago it was 120 bps. The central bank’s hint at the last meeting that it may pause at its next meeting in September triggered a retreat as excess premium bled from the system. But data like this morning’s 2Q PPI unexpectedly dropping 1.0 percent and the two-year CPI forecast easing add fuel to the fire.

Chinese Yuan Hits Five Month High Vs Dollar Despite Troubling Data

The fundamental picture in China is fading quickly, and it’s difficult to say whether authorities can walk that fine line between managing a steady rate of growth while also avoiding a credit bubble implosion. Starting the week off, data from China showed foreign direct investment dropped a massive 17 percent year-over-year through July – the fastest decline in 7 years. Meanwhile, home prices dropped for the most cities in the country in years. Yet, despite this material trouble, the Chinese Renminbi is trading at 6.365 – the highest level versus the dollar since March.

Emerging Markets: ‘Improvement in Ukraine’ Headlines Turn to Russia Data

The lead financial headlines are becoming irksomely familiar. On up days, the reference is to an improved Ukraine situation. On down days, circumstances are said to have worsened. While there is some measure of influence for this geopolitical hotspot, it’s day-to-day impact is likely diminished and requires far more tangible changes to impact the global capital markets. Yet, for Emerging Markets, both broader appetite for risk and the local issues can carry influence. Ahead, Russia is looking at a key round of data on jobs, wages, investment and sales.

Gold Drops Ahead of Key US and UK Inflation Readings

The 0.5 percent decline from gold to start the week does not set off a new trend. For most intents and purposes, the commodity is still trading in congestion – even if SSI and the Commitment of Traders report show an increase in speculative interest. The metal needs a tangible theme to instigate a lasting trend. The upcoming round of US and UK inflation figures can potentially generate interest in its inflation-hedge properties or even as a safe haven. More likely though, a sharp rise or fall in one of these major currencies will provide a direct price swing.

**Bring the economic calendar to your charts with the DailyFX News App.










RBNZ 2-Year Inflation Expectation (3Q)


NZ Dollar may rally on higher expected inflation on better rate expectations



Tokyo Department Store Sales (YoY)


Nation-wide stores have seen a sharp fall in sales after the sales tax rate was raised this year



Nationwide Department Store Sales (YoY)




Euro-Zone Current Account s.a. (euros)


The Eurozone’s current account has significantly risen since 2011



Euro-Zone Current Account n.s.a. (euros)




Consumer Price Index (MoM)



Traders will closely be watching the UK inflation report as the release is likely to play a strong role in interest rate expectations. A higher than expected inflation figure is likely to add bets to a rate hike from the Bank of England, driving the Sterling upward. Lower than expected figures are likely to have the opposite effect.



Consumer Price Index (YoY)





Core Consumer Price Index (YoY)





Retail Price Index (YoY)





Retail Price Index Ex Mort Int.Payments (YoY)





Producer Price Index Input n.s.a. (YoY)





Producer Price Index Output n.s.a. (YoY)





Producer Price Index Output Core n.s.a. (YoY)





DCLG UK House Prices (YoY)





Consumer Price Index (YoY)



US Inflation figures will be a key point of focus for traders and is likely to drive policy expectations



Consumer Price Index Ex Food & Energy (YoY)





Housing Starts (MoM)



The US Housing market has seen a significant improvement in demand over the last three years and if the trend continues, it may add bets to an earlier than expected rate hike from the Fed



Housing Starts





Building Permits (MoM)





Building Permits





Merchandise Trade Balance Total (Yen)



Japanese exports have been on a downward trend since mid-2013, and contracted in May and June. Imports have shown a similar pattern, falling from a 3-year high in Oct 2013 to a contraction in May this year



Adjusted Merchandise Trade Balance (Yen)





Merchandise Trade Exports (YoY)





Merchandise Trade Imports (YoY)



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FOREX -Sterling edges up before BoE report; euro's struggles continue

* Sterling eyes BOE economic update, wages data

* Yen subdued after Japan Q2 GDP contraction

* Euro drops, trades near recent lows (Updates prices, adds comments)

By Anirban Nag

LONDON, Aug 13 (Reuters) – Sterling edged up in early European trade on Wednesday as investors trimmed bets against the currency before a Bank of England report, which may give clues on when the UK will start to tighten monetary policy.

The euro struggled near recent lows while the yen fell against the dollar, digesting data that showed Japan’s economy contracting in the April-June quarter.

Sterling edged up 0.1 percent against the dollar to $ 1.6825 , pulling away from a two-month low of $ 1.6757 struck on Tuesday. It also rose against the euro, with the single currency easing by 0.2 percent to trade at 79.38 pence.

The Bank of England’s Inflation Report, which will include updated economic forecasts, is likely to provide a fresh steer on the BoE’s intentions for rate hikes. The bank has said before that rate hikes, when they happen, will be data driven and gradual.

Wage data – a driver of inflation and an indicator of how much slack remains in the labour market – is due before the Inflation Report and could prove important.

Still, given the pound has fallen in recent weeks and rate hike expectations have more or less remained stagnant, traders said there was a risk that the British currency could rise if the report is hawkish and inflation forecasts are on the higher side.

“We think that the balance of risks is skewed towards some sterling strength,” said Petr Krpata, currency strategist at ING. “Indeed, market expectations of the further path of UK interest rates have stalled recently, leaving room for catch-up should we get some hawkish hints. We think the market is under-pricing the future path of UK interest rates.”

While the market expects Britain’s improving economy will prompt a rate hike in the first quarter of 2015, the euro is being dragged down by recent poor economic data which does not bode well for the euro zone recovery.

The euro eased 0.1 percent against the dollar to$ 1.3351. On Tuesday, the single currency had dipped to $ 1.3336 after German analyst and investor morale plunged as the crisis in Ukraine took a toll. That put it within a whisker of a nine-month trough of $ 1.3333 set last week.

Sim Moh Siong, FX strategist for Bank of Singapore, said the euro is likely to lose more ground given the recent weakness in euro zone economic data and the potential for further monetary easing by the European Central Bank.

“I think the trajectory (for the euro) is still downwards. It’s just that in the near term, there’s a bit of caution in terms of positioning,” Sim said, referring to a build-up in bearish bets against the euro.


Japan’s economy shrank an annualised 6.8 percent in the second quarter, suffering its biggest contraction since the devastating March 2011 earthquake and tsunami as a sales tax hike took a heavy toll on household spending.

The annualised contraction in gross domestic product, however, was slightly less than forecasts for a 7.1 percent drop.

The yen showed limited reaction to the data initially but slipped in European trade. The dollar rose 0.2 percent to 102.45 yen, having traded between 103.15 yen and 101.51 yen over the past couple of weeks.

The yen held steady against the euro, though. The euro stood near 136.69 yen, staying above an 8-1/2 month low of 135.73 yen touched last week.

(Additional reporting by Masayuki Kitano; Editing by Susan Fenton)