Euro surges broadly today on much stronger than expected inflation reading. Flash CPI rose 1.8% yoy in January, up from prior month’s 1.1% yoy, and beat expectation of 1.5% yoy. That’s also the highest reading since February 2013. Core CPI, on the other hand, was unchanged at 0.9% yoy, in line with consensus. Eurozone Q4 GDP showed 0.5% qoq growth, up from 0.3% qoq, beat expectation of 0.4% qoq. Eurozone unemployment rate also dropped to 9.6% in December, better than expectation of being unchanged at 9.8%. That’s also the lowest level since mid-2009.

The set of solid data, in particular headline inflation, add to fuels of talk of stimulus exit by ECB. The headline CPI is now close to ECB’s target or 2% even though core inflation remained sluggish. ECB hawk have already be pushing the end of its asset purchase program, including executive board member Sabine Lautenschlaeger and Bundesbank president Jens Weidmann. And, governing council member Ewald Nowotny also said earlier this week that ECB would get more information to review the quantitative easing program later this summer.

Elsewhere from Europe, German retail sales dropped -0.9% mom in December versus expectation of 0.6% mom. German unemployment dropped -26k in January versus expectation of -5k. German unemployment rate dropped to 5.9% in January. French GDP grew 0.4% qoq in Q4, met expectation, up from prior quarter’s 0.2% qoq. UK Gfk consumer sentiment improved to -5 in January. UK mortgage approvals rose to 68k in December. M4 money supply dropped -0.5% mom in December.

Released in US session, Canada GDP rose 0.4% mom in November, above expectation of 0.3% mom. Canada IPPI rose 0.6% mom in December while RMPI rose 6.5% mom. From US, employment cost index rose 0.5% in Q4. S&P Case Shiller 20 cities house price rose 5.3% yoy in November.

BoJ left monetary policies unchanged as widely expected. Short term interest rates was held at -0.10%. The target of annual asset purchase was kept at JPY 80T under the yield curve control framework. The central bank warned in the quarterly forecast report that "risks to both economic activity and prices are skewed to the downside". While it noted that "The momentum for achieving our 2 percent inflation target is maintained", BoJ also sounded cautious and said it "lacks strength". BoJ expects inflation to hit 2% target by around March 2019, unchanged from November projections.

A bunch of data is also released from Japan today. Household spending dropped -0.3% mom in December, above expectation of -0.8% yoy. Industrial production rose 0.5% mom in December, above expectation of 0.3% mom. Unemployment rate was unchanged at 3.1% in December. Housing starts rose 3.9% yoy in December, below expectation of 7.4% yoy. Also from Asia Pacific, Australia NAB business confidence was unchanged at 6 in December.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0630; (P) 1.0685 (R1) 1.0751; More…..

EUR/USD recovers today but stays below 1.0774. Intraday bias stays neutral first. No change in the outlook that choppy rise from 1.0339 is seen as a corrective move. On the upside, above 1.0774 will extend the rise but upside should be limited by 1.0872 resistance. On the downside, break of 1.0588 will indicate that such rise is completed and turn bias to the downside for retesting 1.0339 low.

In the bigger picture, whole down trend from 1.6039 (2008 high) is in progress. Such down trend is expected to extend to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. On the upside, break of 1.1298 resistance is needed to confirm medium term bottoming. Otherwise, outlook will stay bearish in case of rebound.

Economic Indicators Update

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