The Euro may fall if German ZEW survey data disappoints. The Australian Dollar looks to the details of the government’s 2013-14 budget for direction.

Talking Points

• Euro May Fall if Soft ZEW Survey Drives ECB Easing Expectations

• Australian Dollar Looks to 2013-14 Federal Budget for Direction Cues

• US Dollar Corrected Lower Overnight After Setting Near-3yr High

Germany’s ZEW Survey of investor confidence is in focus in European trading hours. Economists’ forecasts call for the forward-looking Expectations gauge to post a modest recovery in May after hitting a three-month low in April. While Eurozone debt crisis concerns likely eased among respondents polled for the survey, growth fears may have intensified. This opens the door for a downside surprise.

Bloomberg’s Eurozone Financial Conditions Index rose to a two-month high in the first part of May, hinting the intensity of sovereign risk jitters has likely ebbed over recent weeks. April’s German PMIs reports showed private-sector output shrank for the first time in five months however. That may signal rising worries about Germany’s vulnerability to the slump elsewhere in the Euro area which could be reflected in a softer ZEW print.

The Euro may come under selling pressure if sentiment does prove disappointing as traders speculate on the possibility of further ECB easing, particularly after Governor Council member and Bank of Italy Governor Ignazio Visco sounded off yesterday in favor of introducing a negative deposit rate to encourage bank lending. The final revision of April’s GermanCPI figures may offer a fruitful backdrop to such a move after the year-on-year inflation rate was confirmed at 1.2 percent, the lowest since September 2010.

Meanwhile, Australia’s Federal Budget for the 2013-14 fiscal year will be unveiled by Treasurer Wayne Swan. Forecasts for the public deficit range in the A$14-15 billion range while the goal of achieving a fiscal surplus by the 2014-15 period is widely expected to be abandoned. Particularly sharp downward revisions to the government’s economic growth outlook are likely to weigh on the Australian Dollar as investors build out expectations for further RBA interest rate cuts. Sky News hinted the budget will include an A$25 billion infrastructure spending package however. If this is accurate, it may boost growth expectations and underpin the recently beleaguered currency.

The US Dollar underperformed in overnight trade, down as much as 0.4 percent on average against its leading counterparts. The move appeared corrective as markets digested the greenback’s gains over the prior 24 hours, when the benchmark currency hit the highest level in nearly three years.