Most major and EM currencies remain at elevated levels vs. the USD as Asian equity markets continue to make gains and highlight that risk appetite is alive and well. EURUSD remains well supported above 1.4940-50, but is still yet to make its next move to resistance at 1.5063 (26 Oct high), and thereafter 1.5100 resistance. Today’s German CPI (EU harmonized) figures were slightly subdued at 0.1% MoM against forecasts for a 0.2% gain, bringing the YoY figures back down to -0.1% from 0.0% prior. EURUSD has slid back slightly to 1.4980 levels after the release, but good bids are keeping the pair buoyed and the main focus will be the German and Eurozone ZEW survey results due later in the session. We expect modest improvements across the board, and anticipate EURUSD will rally strongly on any better-than-expected readings. The notable exception amongst the majors in the past day has been GBP which suffered a setback yesterday on the announcement of Kraft’s latest bid for Cadbury Plc; there was no increase in the price per share offered as some had anticipated, and the hostile bid was once again rejected. GBPUSD topped out at 1.6843 and spent the rest of the session edging lower to 1.6700-50 levels. Early this morning GBPUSD took another sharp hit when Fitch’s David Riley was quoted as saying the UK is most at risk of losing its AAA sovereign status due to the fact it will need “the largest budget adjustment”; so far the pair has dipped back to 1.6602 lows, and EURGBP surged back above 0.9000 after yesterday’s false break of 0.8900 on the downside.
The other key events of the session will be Swedish Industrial Production and Norwegian CPI. EURNOK has regained most of its ground since the unwind of risk-assets last week (trading at 8.3800 at the time of writing,) but 8.3500 remains a significant support between here and 8.2500 lows. The consensus reading for MoM inflation is 0.0% (0.8% YoY); look out for higher than expected readings which might push EURNOK and USDNOK lower through their key levels.