Euro To Look Past German IFO As Markets Stay Focused On Earnings

By Ilya Spivak, Currency Strategist

Talking Points
  • German IFO Unlikely to Yield Strong Response, Earnings News in Focus
  • S&P 500 Stock Index Futures Point to Cautiously Risk-On Environment
  • US Dollar Consolidates vs. Major Currencies in Quiet Overnight Trade

Major currencies consolidated againstthe US Dollar (ticker: USDollar ) in quiet overnight trade. In European hours,the German IFO business confidence survey headlines theeconomic calendar, with median forecasts calling for a modestpullback in the headline Business Climate index. A print in linewith expectations (109.5) would snap a streak of five consecutiveincreases but the rising trend playing out since late last yearwould be left firmly intact, both on a month-to-month and 3-monthaverage basis. On balance, this seems to offer little that has notbeen priced in already, amounting to modest market-moving potentialfor the Euro .

Looking ahead, the corporate earningsdocket enters the spotlight once again. The centraluncertainty driving financial markets remains the degree to whichan accelerating recovery in the US can offset a recession in theEurozone and a slowdown in China. This means traders will befocused on guidance from cycle-sensitive companies to establishnear-term direction for risk appetite trends. This time around,first-quarter reports from McDonald’s and Kimberly-Clark willbe sought for a gauge of consumer sentiment while those fromHoneywell, General Electric and Schlumberger will serve as a proxyfor broad-based global growth trends. Sideline comments fromthe G-20 FinanceMinisters’ meeting as well as the ongoing IMF and World Banksummit may also factor into the equation.

S&P 500 stockindex futures are pointing higher in late Asian trade,arguing for a broadly risk-supportive environment (at least for thetime being). This generally bodes well for stocks-linkedcurrencies, particularly the Australian, Canadianand New Zealand Dollars . To some extent, the same can be said ofthe Euro , while the British Pound appears focused on BOE policy rather than riskappetite. The still-formidable correlation between benchmark10-year US Treasury yields and USDJPY suggests sentiment-basedmoves will be indirectly transmitted into Yen price action as well, with the Japanesecurrency finding itself on the defensive in the event that anupbeat session sends shares higher and weighs on bond prices.Needless to say, the return of risk aversion would producepolar-opposite results.

Asia Session : What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

23:50

JPY

Tertiary Industry Index (MoM) (FEB)

0.0%

0.7%

-0.6% (R+)

1:30

AUD

Export Price Index (QoQ) (1Q)

-7.0%

-3.0%

-1.5%

1:30

AUD

Import Price Index (QoQ) (1Q)

-1.2%

-0.1%

2.5%

1:35

CNY

MNI Flash Business Sentiment Survey (APR)

55.40

-

54.81

E uro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

6:00

EUR

German Producer Prices (MoM) (MAR)

0.4%

0.4%

Low

6:00

EUR

German Producer Prices (YoY) (MAR)

3.1%

3.2%

Low

7:00

JPY

Convenience Store Sales (YoY) (MAR)

-

4.8%

Low

8:00

EUR

German IFO - Business Climate (APR)

109.5

109.8

High

8:00

EUR

German IFO - Current Assessment (APR)

117.0

117.4

Medium

8:00

EUR

German IFO - Expectations (APR)

102.3

102.7

Medium

8:30

GBP

Retail Sales ex Auto Fuel (MoM) (MAR)

0.4%

-0.8%

Medium

8:30

GBP

Retail Sales ex Auto Fuel (YoY) (MAR)

1.3%

1.0%

Medium

8:30

GBP

Retail Sales w/Auto Fuel (MoM) (MAR)

0.5%

-0.8%

Low

8:30

GBP

Retail Sales w/Auto Fuel (YoY) (MAR)

1.5%

1.0%

Low

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.3083

1.3221

GBPUSD

1.6014

1.6117

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya , e-mail ispivak@dailyfx.com . Follow me on Twitter at @IlyaSpivak

To be added to Ilya 's e-mail distribution list, send a note with subject line "Distribution List" to ispivak@dailyfx.com
DailyFX is the forex news and research arm of FXCM, Inc (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

Original Article: http://www.dailyfx.com/forex/fundamental/daily_briefing/session_briefing/euro_open/2012/04/20/Euro_to_Look_Past_German_IFO_as_Markets_Stay_Focused_on_Earnings.html

DailyFX is the forex news and research arm of FXCM (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

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