Talking Points:

• Euro may find interim support if Germany’s flash CPI data tops forecasts
• US Dollar may fail to capitalize as core PCE inflation hits 15-month high
• NZ Dollar gains with milk prices as dairy exports rise most since Aug’14

The preliminary set of February’s German CPI figures headlines the economic calendar in European trading hours. The headline year-on-year inflation rate is expected to slow to 0.1 percent, the lowest since September. However, leading survey data from Markit Economics released earlier this week suggested the pace of inflation – while modest – quickened to a three-month high. The Euro may find a degree of support if this translates into a better-than-expected CPI print that weighs against ECB stimulus expansion bets.

Price growth trends will remain in focus later in the day as the Fed’s preferred US PCE inflation data comes across the wires. The core year-on-year rate is seen edging higher to 1.5 percent, the highest since October 2014. While broadly encouraging for the US Dollar, the improvement was telegraphed in last week’s CPI report and so may have lost some of its market-moving potential. Follow-through could be undermined further if investors weigh up the report against PMI survey data published earlier in the week that showed service-sector inflation hit a five-month low while manufacturing output prices fell at the fastest pace since June 2012.

The New Zealand Dollar outperformed overnight after January’s Trade Balance report revealed an unexpected monthly surplus of NZ$8 million, topping bets on a –NZ$271 million deficit. This marked the first print in positive territory since May 2015. Perhaps most critically, cross-border sales of dairy products – the country’s leading export group – jumped 3.7 percent year-on-year to record the best performance since August 2014. Indeed, the Kiwi traded higher alongside locally-traded Whole Milk futures prices.

What did DailyFX analysts get wrong last year? Check out our Lessons from 2015 to find out!

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European Session

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