The G-10 rundown USD – the greenback back lower, if not dramatically so, after the
Bloomberg story. Still feels unsafe to trade the uncertainty until we have a look at whatever trade deal takes shape. Complacency looks rather profound and the Fed continues to actively tighten. A truly stable yuan would likely require a Fed in outright easing mode.
EUR – the euro is neutral to the crossfire of themes in this market – down versus sterling but up versus a struggling JPY. Not seeing any positive catalysts for the euro besides passive reactions to more negative developments elsewhere. Yesterday, the European Central Bank's Guindos was talking up the ECB’s toolbox potential (I would argue that the most effective tool is fiscal and they don’t have this one in that toolbox) and chief economist Praet has also talked up the ECB’s ability to change guidance if conditions warrant.
JPY – the yen is the weakest of the lot as the Bank of Japan making it clear that there is only one direction for policy to move from here, and it’s an easy sell as complacency has spread like wildfire.
GBP – hard to find attribution for the move in sterling yesterday – possibly flow linked – as prime minister Theresa May heads to Brussels today to discuss changes to the Brexit deal with Claude Juncker. Not much range left to play with in EURGBP if something hopeful emerges.
CHF – would normally expect more CHF downside on the backdrop of risk on and a weak JPY, but ECB sounding the dovish notes perhaps keeping the key EURCHF stuck in the range. USDCHF barely hanging on to parity here.
AUD – Would a stable yuan prevent an Australian credit crunch? Life difficult for AUDUSD bears if price action goes above 0.7200. Tempering enthusiasm for AUD should be stories like this
one, pointing to diplomatic tensions between China and Australia.
CAD – USDCAD slipping into the 1.3150-1.3200 pivot zone on a weaker US dollar. CAD seems less reactive than AUD to swings in the US dollar and the two-year US-Canada rate spread has bobbed around within a ten-bps range for months. Friday sees Canada releasing its December Retail Sales report.
NZD – our chief interest here in relative strength versus the AUD, as AUDNZD needs to reverse back above 1.0500 to revive any bullish hopes. We have discussed the trade tension angle with China as a possible catalyst for NZD weakness and New Zealand is an easier target than Australia if China wants to press its point.
SEK – an interesting test for the krona yesterday as the Sweden CPI release for January missed badly for the core reading, pushing SEK over the edge across the board, as Riksbank expectations were nudged back lower. Interesting reversal later in the session in USDSEK on USD weakness, but NOKSEK and EURSEK have remained above the former resistance levels (10.50 in EURSEK the important one if the SEK is to continue weakening).
NOK – NOKSEK upside has been a prominent theme and saw a further boost yesterday above 1.0800. Disappointing that EURNOK has not worked more aggressively lower, given the backdrop of strong risk appetite and oil prices. A warning or an opportunity?
Upcoming Economic Calendar Highlights (all times GMT) 0800 – South Africa Jan. CPI
1100 – Sweden Riksbank’s Floden to speak
1500 – Euro Zone Preliminary Feb. Consumer Confidence
1810 – US Fed’s Kaplan (Non-voter) to speak
1900 – US FOMC Meeting Minutes
