Forex Markets Eye Eurozone And US Inflation, US And Canadian GDP

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Durable Goods Orders are an important barometer for US consumption, which constitutes roughly 70% of GDP. Typically, consumers hold off on buying durable goods during poor economy conditions; thus, improved orders suggest confidence among American consumers with respect to their future financial security. The preliminary January print is expected to show a drop of -2.0% over the prior month after the +2.8% increase in December. The data won’t likely help US growth expectations for Q1’18, which have edged lower over the past month (per the Atlanta Fed GDPNow forecast) to +3.2% annualized.

Pairs to Watch: EUR/USD, USD/JPY, DXY Index, Gold

02/28 Wednesday | 10:00 GMT | EUR Eurozone Consumer Price Index (FEB)

The European Central Bank sees EUR/USD finishing 2018 at 1.1700, and at its current exchange rate, it’s more than 5% above the central bank’s forecast. Year-over-year, the Euro trade-weighted exchange rate is up by +9.7%, a veritable headwind for inflation.Given that the ECB has made clear it wants to see inflation back near its +2% target on a sustainable basis before it sincerely exits all of its extraordinary, any signs that inflation is struggling could undercut speculation around the ECB removing its stimulus; a reaction that could sink the Euro.

Accordingly, as market participants are being forced to reconsider their bullish Euro bets, there is no data release in the current week – and perhaps, thus far year-to-date – more important than the preliminary February CPI report. Due in at +1.2% on the headline, this would be a small decline from the prior +1.3% reading in January (y/y). The core reading is due in unchanged at +1.0% (y/y). Neither points to an outcome where traders should be eager to rekindle speculation over a hawkish ECB policy turn.

Pairs to Watch: EUR/GBP, EUR/JPY, EUR/USD