Talking Points:
– Highest Euro-Zone Zew Survey: Expectations since September 2009.
– Highest German ZEW Survey: Expectations since December 2009.
– BoE’s forward guidance may be working as CPI steps down.
To receive this report in your inbox every morning, sign up for Christopher’s distribution list.
INTRADAY PERFORMANCE UPDATE: 09:30 GMT
Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): -0.05% (-0.73% prior 5-days)
ASIA/EUROPE FOREX NEWS WRAP
The US Dollar is broadly lower following a weak start to the trading week yesterday, but price action has started to shift from favoring the New Zealand Dollar over its Australian counterpart and the Euro over the British Pound. As the trading day has marched forward, there’s been an increased interest surrounding the Euro as regional bond yields have crept higher.
Typically when European bond yields have moved up (particularly in Italy and Spain), the Euro has suffered. Today, however, yields are not increasing because investors are selling on fear; rather, improving economic growth prospects have reduced the demand for fixed income and boosted demand for riskier assets like stocks (the German DAX is holding near its all-time high set yesterday at 8626.11).
Indeed, signs of a stronger Euro-Zone are emerging, with the ZEW Surveys surging to their best outputs in four years. Here are the figures stoking Euro strength:
–Euro-Zone ZEW Survey: Expectations (SEP): 58.6 from 44.0
– German ZEW Survey: Current Situation (SEP): 30.6 versus 20.0 expected, from 18.3
– German ZEW Survey: Expectations (SEP): 49.6 versus 45.0 expected, from 42.0
Meanwhile, the British Pound is seeing a bout of weakness following the soft CPI report. The report underscores shifting consumer expectations as the Bank of England attempts to keep interest rates pointed lower. Accordingly, if data today proliferates and becomes a trend, there is scope for a short-term, fundamentally based reversal in the EURGBP.
EURUSD 5-minute Chart: September 17, 2013 Intraday
Taking a look at European credit, higher yields across the region (especially in the core) on the back of improving economic data have lifted the Euro. The Italian 2-year note yield has decreased to 1.916% (-4.2-bps) while the Spanish 2-year note yield has increased to 1.689% (+0.5-bps). Similarly, the Italian 10-year note yield has decreased to 4.434% (-1.5-bps) while the Spanish 10-year note yield has increased to 4.407% (+0.2-bps); lower yields imply higher prices.
Read more: UK CPI, German ZEW to Spark Minor Pound, Euro Moves
ECONOMIC CALENDAR – UPCOMING NORTH AMERICAN SESSION
See the DailyFX Economic Calendar for a full list, timetable, and consensus forecasts for upcoming economic indicators. Want the forecasts to appear right on your charts? Download the DailyFX News App.
— Written by Christopher Vecchio, Currency Analyst
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form