Derived Data That Drive Results
Synopsis:
Société Générale assesses the upcoming week's key economic data releases, predicting potential currency movements based on expected regional economic performances. The focus is on the potential for upside surprises in the Eurozone and how they could influence EUR/USD, along with implications for other currency pairs like AUD/USD and USD/NOK.
Key Points:
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Recent Market Movements: Following a significant drop in EUR/USD due to U.S. CPI data two weeks ago, the currency pair has recovered approximately half of its losses. This recovery sets the stage for a potentially volatile week given several high-profile economic reports due in the coming days.
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Influence of Economic Surprises: SocGen suggests that positive surprises in European economic data could have a more pronounced effect on the markets compared to strong U.S. data, given current expectations. Conversely, any unexpected weakness in U.S. data might weigh more heavily than sluggish European results.
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FOMC Meeting Expectations: The Federal Open Market Committee (FOMC) is expected to maintain a cautious tone regarding rate cuts. The upcoming payroll data is anticipated to affirm a tight U.S. labor market unless it significantly underperforms expectations.
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Potential for European Data Surprises: There is notable anticipation for the upcoming Eurozone CPI and GDP data, with SocGen predicting potential upside surprises (CPI at 2.5% and GDP growth at 0.3% quarter-over-quarter). Positive results here could bolster the EUR/USD, especially if U.S. data does not surpass expectations markedly.
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Implications for Other Currencies: Positive developments in risk sentiment combined with a stable or strengthening euro could drive AUD/USD towards 0.68 and push USD/NOK down to 10.60.
Conclusion:
This week's array of critical economic data releases from both the U.S. and Europe is poised to play a significant role in shaping currency market dynamics. SocGen highlights the potential for significant currency movements based on regional economic performances and overall market sentiment.
