Economic highlights for today (2/7/2018)

During the European morning, we get Germany’s Industrial Output for December and past week’s US Crude Oil inventories which could move the market. As for speakers, ECB Board member Lautenschlager, Dallas Fed president Kaplan and FOMC members Dudley and Evans speak. Please also note that the ECB Governing Council is to hold a meeting today and a press conference will follow.


RBNZ: Steady as she goes

RBNZ is to announce to its interest rate tonight at 20:00 (GMT) and is expected to remain on hold at +1.75%. The market has priced in the probability to remain on hold at 99.88% and the financial data also support the case as the inflation is currently at +1.6%, below RBNZ’s target range of 2-3%. Focus should shift to the accompanying statement and specifically to the inflation rate which has recently dropped. Another point to keep a look out for, would be the recent strengthening of the NZD. Overall, the statement could have a positive economic outlook, however due to the factors mentioned before we see the case for a cautious comment about the future rate hike path. NZD could weaken as the statement could be neutral to dovish.

NZD/USD yesterday, regained any losses it suffered due to the US stock market mini crash and continued to trade in a sideways manner staying between the 0.7370 resistance level and the 0.7250 support level. We see the case for the pair to continue in a sideways manner with a bearish tone in the short term as the fundamentals suggest. Should the bulls take the driver’s seat we could see the pair breaking the 0.7370 resistance line and aim for the 0.7417 resistance hurdle. On the other hand should the bears have the upper hand we could see the pair breaking the 0.7250 support level and aim for the 0.7180 support barrier.

German coalition partners: Painful Compromises

German parties have been negotiating hard and long in order to form a government coalition in the past few days. German chancellor Merkel stated that all of the parties involved in the coalition negotiations will have to make painful compromises. CDU currently seem to lack leverage on the negotiating table and we could see it making more painful compromises than the SPD on the issues of temporary workers and healthcare. SPD officials on the other side, seem to be confident that they are on the right track, however work still needs to be done. We see the case for the partners to reach an agreement at any given moment until the end of the week and for the EUR to strengthen upon announcement of the agreement.

The EUR/USD moved in a sideways manner yesterday testing the 1.2355 support line. We see the case for the pair to continue to trade in a sideways manner in the short term and it may experience some bullish pressures as the US stock market stabilizes even further. Should the pair find new selling orders we could see it breaking the 1.2355 support line and aim for the 1.2230 support area. On the other hand, should the pair find buying orders, we could see it breaking the 1.2495 resistance line aim for the 1.2600 resistance level.