European markets will be off to a late start this week as most traders are still busy enjoying Easter Monday. However, catalysts lined up could still set longer-term direction.
Euro zone flash CPI readings (Apr. 4, 10:00 am GMT)
By midweek, the region will be ready to release its CPI estimates for the month of March and possibly shape ECB tightening expectations. Keep in mind that a number of officials have already been dropping hawkish remarks left and right, so upbeat CPI estimates could further stoke rate hike hopes.
Analysts are expecting the headline flash CPI reading to climb from 1.1% to 1.4% and the core reading to tick up from 1.0% to 1.1%, which would reflect healthy inflationary pressures.
Last week’s price review
The euro had yet another mixed performance during the past week. With that said, the euro’s price action was roughly uniform at the start. Although the euro did eventually fall victim to opposing currency price action later.
The euro had a promising start on Monday, which some market analysts attributed mainly to weakness on the part of the Greenback. Although hawkish comments from Jens Weidmann, the Bundesbank President and an ECB Member, were also cited for the euro’s rise.
As for specifics, Weidmann had this to say:
“The markets see a first interest rate increase around the middle of the year 2019, which is probably not entirely unrealistic.”
Weidmann’s comments about interest rates appear to support the rumors from last week about ECB members supposedly shifting their focus from the QE program to the future path of interest rates.
Unfortunately for euro bulls, ECB Member Erkki Liikanen got some press time on Tuesday, and he sent the euro reeling in pain after he said that:
“A gradual tightening of monetary policy will rest on a more solid basis when indications of inflation rates to potentially temporarily exceed 2 percent become more prominent in inflation expectations.”
Liikanen then said there aren’t yet any “trustworthy” signs that inflation is picking up in a sustainable manner before stressing that the ECB’s “monetary policy is and will be data dependent. So we [the ECB] must follow fresh incoming data every time.”
Liikanen then drove home the point that the ECB is ready and willing to extend its QE program even further when he said that: “We said we’re extending net asset purchases until September and beyond if needed.”
It’s worth noting that the euro’s slide due to Liikanen’s comments weren’t enough to push EUR pairs below the previous week’s closing prices (dashed horizontal line).
And that’s where opposing currency price action came in, since demand for the Greenback allowed the dollar to give the euro the boot by Wednesday while demand for the comdolls made the euro lose out to the comdolls by Thursday.
The Swiss Franc
The poor Swissy was a net loser during the past week. So, are the euro and the Swissy still dancing in tandem? Yeah, pretty much.
The Swissy didn’t get as much of a boost on Monday, though. Also, the Swissy got a bigger hit when word got around that North Korean Boss-Man Kim Jong Un met China’s Boss-Man Xi Jinping, likely because market players were unwinding their safe-haven bets on the Swissy.