News and Events:
Swiss CPI prints higher
The Swiss consumer price index came in slightly above median forecasts in January as it remained unchanged while economists were expecting a contraction of 0.1%m/m. On a year-over-year basis, the headline gauge rose 0.3%y/y – matching expectations – compared to a flat reading in December. Looking at the HICP gauge, (Harmonised Index of Consumer Prices, which enables a comparison of CPI measures across EU countries) inflation also rose 0.3%y/y in January, while on a month-over-month basis, it contracted 0.2%.
Despite the drop in clothing and footwear prices at the end of the Christmas sales period, the big picture did not change much during the first month of the year. EUR/CHF traded sideways at around 1.0660 amid the release. Even the rejection of the corporate tax reform on Sunday did not allow the CHF to weaken, suggesting that investors are willing to put up with more bad news from Switzerland. Indeed, in spite of the sharp rally in the equity market, the geopolitical environment, on both side of the Atlantic, has never been so uncertain. This uncertainty is encouraging international investors to keep part of their investments in safe haven assets. The Swiss franc is not the only asset enjoying this situation. Gold has risen more than 7.5% since 1st January. Given the current environment, we see no justification for a change in the current dynamic as the European political calendar, together with Trump’s first 100 days, remain the main challenges of the year.
German & Eurozone ZEW should provide optimism
The biggest source of fear this year for financial markets is Europe’s political uncertainties. Eurozone and German ZEW sentiment indicators will be released today. In particular, when it comes to Germany, markets are still anxious to get a sense of what is happening. The underlying difficulties of the Euro area should be reflected in the survey. For example, it is clear that the European elections (French, German and Dutch) should add significant downside pressures to economist sentiment, which from our vantage point should remain mixed.
However, this indicator does not fully reflect the underlying robustness of the largest European economy. The German 10Y is still on the rise since the start of the year – yielding around 0.33%. The deflation risk seems to be slowly fading and the annual Eurozone Core CPI is on the rise (0.9% y/y) and is now at its highest level in two years. Moreover, the ECB’s objective of 1.7% in 2019 looks attainable and it seems that we are at a turnaround in terms of monetary policy.
Currency wise, the major driver for the euro is the political uncertainty and this definitely helps the ECB as it adds upside pressures on inflation and as result on growth. Our view is mixed on the single currency as there is a major risk of depreciation due to the continued rise of nationalist parties despite better economic data.
Today’s Key Issues (time in GMT):
- Jan CPI MoM, exp -0,10%, last -0,10% CHF / 08:15
- Jan CPI YoY, exp 0,30%, last 0,00% CHF / 08:15
- Jan CPI EU Harmonized MoM, last -0,10% CHF / 08:15
- Jan CPI EU Harmonized YoY, last -0,20% CHF / 08:15
- Jan Producer & Import Prices MoM, exp 0,20%, last 0,20% CHF / 08:15
- Jan Producer & Import Prices YoY, exp 0,50%, last 0,00% CHF / 08:15
- 4Q South Africa Unemployment, exp 27,00%, last 27,10% ZAR / 08:30
- 4Q P GDP WDA QoQ, exp 0,30%, last 0,30% EUR / 09:00
- 4Q P GDP WDA YoY, exp 1,00%, last 1,00%, rev 1,10% EUR / 09:00
- Jan Money Supply M2 YoY, exp 11,30%, last 11,30% CNY / 09:03
- Jan Money Supply M1 YoY, exp 20,20%, last 21,40% CNY / 09:03
- Jan Money Supply M0 YoY, exp 8,90%, last 8,10% CNY / 09:03
- Jan New Yuan Loans CNY, exp 2440.0b, last 1040.0b CNY / 09:03
- Jan Aggregate Financing CNY, exp 3000.0b, last 1630.0b, rev 1626.0b CNY / 09:03
- Jan CPI MoM, exp -0,50%, last 0,50% GBP / 09:30
- Jan CPI YoY, exp 1,90%, last 1,60% GBP / 09:30
- Jan CPI Core YoY, exp 1,70%, last 1,60% GBP / 09:30
- Jan Retail Price Index, exp 266,2, last 267,1 GBP / 09:30
- Jan RPI MoM, exp -0,40%, last 0,60% GBP / 09:30
- Jan RPI YoY, exp 2,80%, last 2,50% GBP / 09:30
- Jan RPI Ex Mort Int.Payments (YoY), exp 3,10%, last 2,70% GBP / 09:30
- Jan PPI Input NSA MoM, exp 1,00%, last 1,80%, rev 2,70% GBP / 09:30
- Jan PPI Input NSA YoY, exp 18,50%, last 15,80%, rev 17,00% GBP / 09:30
- Jan PPI Output NSA MoM, exp 0,30%, last 0,10%, rev 0,20% GBP / 09:30
- Jan PPI Output NSA YoY, exp 3,20%, last 2,70%, rev 2,80% GBP / 09:30
- Jan PPI Output Core NSA MoM, exp 0,30%, last 0,00% GBP / 09:30
- Jan PPI Output Core NSA YoY, exp 2,20%, last 2,10% GBP / 09:30
- Dec House Price Index YoY, exp 6,50%, last 6,70%, rev 6,10% GBP / 09:30
- Dec Industrial Production SA MoM, exp -1,50%, last 1,50% EUR / 10:00
- Dec Industrial Production WDA YoY, exp 1,70%, last 3,20% EUR / 10:00
- Feb ZEW Survey Current Situation, exp 77, last 77,3 EUR / 10:00
- Feb ZEW Survey Expectations, last 23,2 EUR / 10:00
- Feb ZEW Survey Expectations, exp 15, last 16,6 EUR / 10:00
- 4Q P GDP SA QoQ, exp 0,50%, last 0,50% EUR / 10:00
- 4Q P GDP SA YoY, exp 1,80%, last 1,80% EUR / 10:00
- Jan NFIB Small Business Optimism, exp 105, last 105,8 USD / 11:00
- Dec Retail Sales MoM, exp -2,00%, last 2,00% BRL / 11:00
- Dec Retail Sales YoY, exp -4,60%, last -3,50% BRL / 11:00
- Jan PPI Final Demand MoM, exp 0,30%, last 0,30%, rev 0,20% USD / 13:30
- Jan PPI Ex Food and Energy MoM, exp 0,20%, last 0,20%, rev 0,10% USD / 13:30
- Jan PPI Ex Food, Energy, Trade MoM, exp 0,20%, last 0,10% USD / 13:30
- Jan PPI Final Demand YoY, exp 1,50%, last 1,60% USD / 13:30
- Jan PPI Ex Food and Energy YoY, exp 1,10%, last 1,60% USD / 13:30
- Jan PPI Ex Food, Energy, Trade YoY, last 1,70% USD / 13:30
- Fed’s Lacker to Speak at University of Delaware USD / 13:50
- Fed’s Yellen Appears Before Senate Banking Panel USD / 15:00
- Dallas Fed’s Kaplan Speaks in Houston USD / 18:00
- Fed’s Lockhart to Speak on Economy in Huntsville, Alabama USD / 18:15
- RBA’S Heath Speech at ABE Conference in Sydney AUD / 20:50
- Jan Foreign Direct Investment YoY CNY, exp 1,40%, last 5,70% CNY / 23:00
- Jan Tax Collections, exp 138200m, last 127607m BRL / 23:00
The Risk Today:
EUR/USD’s selling pressures continue. the pair has broken strong hourly support given at 1.0620 (30/01/207 low). The break of this level is paving the way towards stronger hourly support at 1.0581 (16/01/2016 low) and 1.0454 (11/01/2017 low). Expected to see continued decrease. In the longer term, the death cross late October indicated a further bearish bias. The pair has broken key support given at 1.0458 (16/03/2015 low). Key resistance holds at 1.1714 (24/08/2015 high). Expected to head towards parity.
GBP/USD is still trading below strong resistance given at 1.2771 (05/10/2016 high). The technical structure suggests that the pair should back bouncing lower towards support given at 1.2254 (19/01/2016 low). The long-term technical pattern is even more negative since the Brexit vote has paved the way for further decline. Long-term support given at 1.0520 (01/03/85) represents a decent target. Long-term resistance is given at 1.5018 (24/06/2015) and would indicate a long-term reversal in the negative trend. Yet, it is very unlikely at the moment.
USD/JPY is now consolidating after its increase from support given at 111.36 (28/11/2016 low). Hourly resistance is given at 115.62 (19/01/2016 high). Expected to see continued sideways price action. We favor a long-term bearish bias. Support is now given at 96.57 (10/08/2013 low). A gradual rise towards the major resistance at 135.15 (01/02/2002 high) seems absolutely unlikely. Expected to decline further support at 93.79 (13/06/2013 low).
USD/CHF‘s medium-term momentum is still bearish despite ongoing increase. Key resistance is given at a distance at 1.0344 (15/12/2016 high). We believe that the road is nonetheless clearly wide-open for further decline if the pair gets back below parity. In the long-term, the pair is still trading in range since 2011 despite some turmoil when the SNB unpegged the CHF. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours nonetheless a long term bullish bias since the unpeg in January 2015.