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Eurozone inflation forecast to slide, euro could fall

business-articlesEurozone inflation forecast to slide, euro could fall
  • Eurozone inflation expected to have dipped in December
  • US payroll optimism in wake of ADP employment data
  • Canadian employment figures forecast to plummet
Eurozone CPI forecast to have fallen in December
The Eurozone is set to publish its initial CPI estimate for December later this morning, and the data could leave the euro weaker.
Economists forecast that the ‘flash’ estimate will show that inflation in the Eurozone dipped from 1.5% to 1.4% last month.
This would edge inflation even further away from the European Central Bank’s (ECB) target rate of 2%, further denting hopes of some measure of monetary tightening from the Bank in 2018.
However, there may be some hope for the euro as analysts predict that core inflation -which strips out volatile items such as food and fuel- will have held steady at the end of 2017.
Robust underlying inflation would support hopes that prices could still pick up this year and may help to trim some of EUR’s losses.
Strong ADP report may led to better than expected US payroll figures
The US dollar may find itself in a position to shake off some of its New Year blues later this afternoon as the US Department of Labour publishes its latest non-farm payroll figures.
Economists currently predict that payrolls will have climbed by 190,000 in December, slowing from the 228,000 added in November.
However, following the better than expected ADP employment figures released on Thursday, investors are likely to be hopeful that this will translate into a strong payroll report today – something that could provide some lift for USD.
A robust payrolls performance may also lead to a corresponding fall in the US unemployment rate, which analysts currently forecast will have held at 4.1% last month.
Economists forecast sharp reversal in Canadian employment growth
The CAD exchange rate is expected to stumble later this afternoon as Canada’s own employment report is expected to show that employment growth slowed after a particularly sharp rise in November.
Analysts forecast that employment will have risen by just 1,000 last month as the labour market corrects itself after employment rocketed up by 79,500 in November.
Economists also predict that this sharp slowdown could cause the unemployment rate to climb back up from a nine-year low of 5.9% to 6% in December as the participation rate outpaces those finding employment.
However should Canada’s labour market prove to be more robust than expected at the end of the year, the Canadian dollar may be able to stave off any potential losses.
 
Upcoming Data
Friday, 5 January, 2018
10:00               EUR Inflation
13:30               CAD Unemployment Rate
13:30               USD Non-Farm Payrolls
 
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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