The G-10 rundown
USD – the US dollar is being driven by liquidity considerations and the Fed remains behind the curve. Until the Fed brings out the big bazooka, the USD strength could be set to continue.
EUR – the euro is neglected within the G3, but absorbing strength via a EURGBP rise. The only support for the currency arguably from position squaring as carry trades are squared. But see no reason to like the single currency here – at risk from all directions for now, both existential over the parliamentary elections and from the trade war escalation risks.
JPY – putting on a show of strength again here, something the yen only does when yields are dropping and risk sentiment is at its worst.
GBP – sterling risks not letting up as instead of a wait for another vote, we have no clue what will happen from hour to hour. Next step is getting a look at the strength of the Brexit party vote after today’s EU Parliamentary elections in the UK.
CHF – new local lows here in EURCHF and we’re not far from the huge 1.1200 area in that pair – some of the CHF strength possibly the flip-side of GBP weakness as well as general weak risk sentiment.
AUD – the only concern here is that market sentiment is already very weak. Interesting to note domestic Australian markets celebrating the easy RBA message and Morrison victory at the election when the latter has promised fiscal tightness (tight fiscal and easy monetary are toxic for a currency).
CAD – a smart turnaround back to the weak side makes sense, given the risk-off tone and weaker oil prices. The loonie was boxing above its weight recently. Further tactical downside risk barring sudden brightening of sentiment.
NZD – we would like to call the lows for AUDNZD, but may need a specific NZD-negative catalyst.
SEK – famously unreliable Swedish unemployment rate drops 0.9% in April from March- we have never understood that data series. Not enthused about SEK’s prospects if the EU outlook and trade war risks deteriorate.
NOK – shouldn’t oil weakness weigh a bit more on NOK? Having a tough time understanding the latest aggressive rise in short Norwegian rates – out of sync with the rest of the world.
Upcoming Economic Calendar Highlights (all times GMT)
1130 – ECB Meeting Minutes
1230 – US Weekly Initial Jobless Claims
1345 – US Markit Flash May PMIs
1400 – US Apr. New Home Sales
2245 – New Zealand Apr. Trade Balance
2330 – Japan Apr. CPI
