Summary:

• Swedish inflation seems to be in the spotlight before the US data set
• US dollar on the edge as CPI and retail sales releases loom
• Several central bankers on the agenda as well

The US dollar has had remarkably volatile period of time recently. The beginning of the week was promising for the greenback but upbeat moods were spoilt by the China’s story on the US bond market. In effect the EURUSD saw a few swings up and down but it settled in above a 1.20 handle after all. Thus today’s data might be the last resort for the USD if it wants to regain at least somewhat from its bullish momentum. However, before the US data set is released we will also get the Swedish inflation data which could be equally important.

8:30 am BST – Swedish CPI: The Scandinavian currencies were tough weeks as traders were overwhelmingly fretted about risks stemming from the housing markets. In the meantime, the Riksbank decided to end its QE programme in December (continuing its reinvestment policy though) whereas the account revealed from the past month’s meeting sketched out a bit more hawkish stance among members. Consequently the Swedish currency got a boost and it could be poised to keep on rallying against the beleaguered greenback going forward. In this respect the inflation report seems to be outstandingly crucial in order to sustain bullish momentum in the SEK. The consensus (CPIF) points to 1.9% yoy for December whilst the previous month saw 2% yoy.

1:30 pm BST – US CPI and retail sales: The US dollar has had a harsh start to the new year as it’s almost the weakest currency in the G10 basket after several trading days (just the Swiss franc has turned out to be a notch weaker so far). While the EURUSD is eyeing its highest levels since December 2014, US dollar traders might still hope for a revival seen in the US currency. It could come in once today’s data beat forecasts in an impressive manner but it might be not so easy. We were already offered a PPI print yesterday which was well below market expectations. Thus, even as CPI and PPI are no strongly correlated to each other it does not bode well for the CPI report later today. The street’s call indicates 1.7% yoy as for the core gauge and 2.1% yoy for the headline. Apart from inflation there will also a retail sales reading for December which is slated to show 0.4% mom both for the headline and the ex-auto measure. Nevertheless there are some risks that the stern winter could influence sales already in the past month.

Central bank speakers scheduled for today:

• 8:25 am BST – Riksbank’s Skingsley
• 4:30 pm BST – ECB’s Weidmann
• 5:00 pm BST – FED’s Harker
• 9:15 pm BST – FED’s Rosengren

The EURUSD is eyeing the highest levels since December 2014. Once the US data set disillusions the pair could break a 1.21 handle. Source: xStation5