Euro Looks Beyond German Jobs Data to Italian Bond Sale Outcome

Talking Points

• Euro to Look Past German Jobs Data to Italian Bond Sale Amid Crisis Jitters
• US Spending/Income Data, Kansas City Fed Gauge Set the Stage for Bernanke
• Aussie Falls with Asian Stocks, NZ Dollar Gains on Rising Business Confidence

German Unemployment figures headline the economic calendar in European hours. Expectations call for the economy to shed 7,000 jobs in August, matching the prior month's result. The result is unlikely to stir a significant response from price action given its limited implications for ECB monetary policy, where the focus remains on the central bank's new bond-buying program and the possibility that it might be (at least partially) unveiled at next week's meeting. With that in mind, traders will keep a close eye on average yield levels as Italy sells ¬7.5 billion in 5- and 10-year bonds, with a rise in borrowing costs pointing to swelling funding stress that may put downward pressure on the Euro.

Later in the session, the spotlight turns to the US data docket, where July's Personal Spending and Income figures as well as Augusts' Kansas City Fed Manufacturing Activity gauge are on tap. Income is expected to rise 0.3 percent, in line with its 12-month average, but Spending is seen yielding the largest increase in five months at 0.5 percent. Meanwhile, the Kansas City Fed print is forecast to edge narrowly lower. Traders will evaluate the data in terms of setting the stage for Jackson Hole, with a net positive tone underscoring the recent improvement in US economic data anddenting stimulus bets. Such an outcome stands to put downward pressure on risk-geared currencies while boosting the US Dollar (ticker: USDollar). Needless to say, a softer data set is likely to produce the opposite result.

The greenback was little changed against most of its top counterparts overnight as currency markets remained in a holding pattern ahead of Friday's highly-anticipated speech from Fed Chairman Ben Bernanke at the Jackson Hole Symposium. The Australian Dollar traded broadly lower, sliding as much as 0.4 percent on average against the majors, as a slump across Asian stock exchanges weighed on the sentiment-linked currency. The MSCI Asia Pacific regional benchmark equity index fell 1 percent in the wake of broadly disappointing economic data, with the day's releases from Japan and Australia printing sharply below expectations. The New Zealand Dollar narrowly outperformed as the NBNZ Business Confidence gauge rose to a three-month high in August.

Asia Session: What Happened

GMT	CCY	EVENT	ACT	EXP	PREV
22:45	NZD	Building Permits (MoM) (JUL)	2.0%	3.0%	5.9% (R+)
23:50	JPY	Retail Trade s.a. (MoM) (JUL)	-1.5%	-0.5%	-1.2%
23:50	JPY	Retail Trade (YoY) (JUL)	-0.8%	-0.1%	0.2%
23:50	JPY	Large Retailers\' Sales	-4.4%	-3.2%	-2.6%
23:50	JPY	Loans & Discounts Corp (YoY)	-0.34%	-	0.12%
1:00	NZD	NBNZ Activity Outlook (AUG)	26.4	-	24.0
1:00	NZD	NBNZ Business Confidence (AUG)	19.5	-	15.1
1:30	AUD	Private Capital Expenditure (2Q)	3.4%	3.0%	7.7% (R+)
1:30	AUD	Building Approvals (MoM) (JUL)	-17.0%	-5.0%	-1.0% (R+)
1:30	AUD	Building Approvals (YoY) (JUL)	-10.6%	6.0%	13.0% (R+)

Euro Session: What to Expect

GMT	CCY	EVENT	EXP	PREV	IMPACT
7:55	EUR	German Unemployment Change (AUG)	7K	7K	High
7:55	EUR	German Unemployment Rate s.a. (AUG)	6.8%	6.8%	Medium
8:00	EUR	Italian Hourly Wages (YoY) (JUL)	-	1.5%	Low
8:00	EUR	Italian Hourly Wages (MoM) (JUL)	-	0.2%	Low
8:30	GBP	Net Consumer Credit (JUL)	0.5B	0.6B	Low
8:30	GBP	Net Lending Sec. on Dwellings (JUL)	0.5B	-0.4B	Low
8:30	GBP	Mortgage Approvals (JUL)	47.0K	44.2K	Medium
8:30	GBP	M4 Money Supply (MoM) (JUL)	-	-1.6%	Low
8:30	GBP	M4 Money Supply (YoY) (JUL)	-	-5.2%	Low
8:30	GBP	M4 Ex IOFCs 3M Annualised (JUL)	3.0%	2.9%	Low
9:00	EUR	Euro-Zone Business Climate Indicator (AUG)	-1.3	-1.27	Low
9:00	EUR	Euro-Zone Consumer Confidence (AUG F)	-24.6	-24.6	Medium
9:00	EUR	Euro-Zone Economic Confidence (AUG)	87.5	87.9	Low
9:00	EUR	Euro-Zone Industrial Confidence (AUG)	-15.5	-15	Low
9:00	EUR	Euro-Zone Services Confidence (AUG)	-9	-8.5	Low
9:00	EUR	Italian Business Confidence (AUG)	86.8	87.1	Low
9:00	EUR	Italy to Sell ¬7.5B in 5- and 10-year Bonds	-	-	Medium
9:00	EUR	EC President Barroso speaks in Vienna	-	-	Medium
18:00	EUR	ECB\'s Asmussen speaks in Potsdam	-	-	Low

Critical Levels

CCY	SUPPORT	RESISTANCE
EURUSD	1.2508	1.2596
GBPUSD	1.5806	1.5858

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

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