Talking Points:

• Euro to Fall if Soft German CPI Print Drives ECB Stimulus Expectations

• Thin Holiday Liquidity May Amplify Impact of Unexpected Headline Risk

• Aussie, New Zealand Dollars Rise as Risk Appetite Firms on Asian Bourses

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The preliminary estimate of November’s German CPI figures headlines the economic calendar in European hours. The headline year-on-year inflation rate is expected to print at 1.2 percent, matching the six-month low recorded in the prior month.

A downside surprise on October’s report foreshadowed a drop below 1 percent on the Eurozone region-wide CPI print for the same period and paved the way for a surprise ECB interest rate cut. News-flow from the currency bloc has increasingly underperformed relative to expectations in the past three months, opening the door for a similar outcome this time around. That would feed speculation about further accommodation, driving the Euro lower. We continue to hold short EUR/USD.

Also of note, liquidity is likely to turn scarce as US financial markets shut down for the Thanksgiving holiday. While thin trading conditions can make for muted price, they can likewise amplify volatility in the event that unforeseen headline risk or a particularly sharp deviation from economic data expectations spooks investors.

The Australian and New Zealand Dollars outperformed overnight trade as Asian stocks advancing, pulling the sentiment-linked currencies upward along the way. The MSCI Asia Pacific regional benchmark equity index rose 0.7 percent in a move the newswires chalked up to swelling confidence in the US recovery after an upbeat set of Jobless Claims and UofM Consumer Confidence figures.

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