FX Update: US long bond eyes record low. German recession?

The G-10 rundown

USD – the Fed has its work cut  out  for it as the July 31 FOMC meeting risks increasingly looking like a policy mistake that will take a major hint from Fed officials or even an unscheduled rate cut to turn back.

EUR – EURJPY the favourite way to express downside risks on EU existential concerns linked to Italy and even more so, the risk of Germany slipping into recession.

JPY – JPY back on the bid this morning, with USDJPY pressing down toward the last area of support in the 105.00-104.50 zone. A deepening risk off combined with the negative spiral in bond yields could set a bit more determined JPY strength in motion here toward 100.00 in USDJPY

GBP – yesterday, the news that some in Parliament are increasing  their efforts to avoid a No Deal Brexit steered EURGBP back lower after a break to a (non-flash-crash) post-Brexit high. But few signs that this is enough to sustain confidence.

CHF – the weekly SNB sight deposit data showing weekly gains again yesterday, some CHF 3 billion for the last week, as the SNB has been leaning against this latest move in CHF strength. More downside risk for EURCHF as long as spiral lower in rates continues, with further CHF strength risk from Brexit and Italy stories.

AUD – sentiment is very negative and positioning somewhat crowded, so the path lower for the Aussie is a difficult one – next steps are tonight’s Q2 wage data and the employment data early Thursday

CAD – USDCAD rally has stalled in an important pivot zone up to 1.3300+ with upside swing risks on further deterioration in the risk outlook and from weaker oil prices.

NZD – No follow-on momentum yet after the RBNZ got ahead of market expectations last week – need further weakness very soon to prove that this was enough. 1.0500+ area in AUDNZD in focus as 200-day moving average in focus there.

SEK – July Swedish CPI up tomorrow, but unlikely to serve as a major catalyst as currency weakness is the only driver of a possible upside surprise, which is still expected lower than Germany’s current 1.7% headline rate.

NOK – EURNOK trading nervously around 10.00 ahead of Thursday Norges Bank meeting. The NOK at historic weak levels, but smaller currencies not in favour here as long as safe havens and Gold/silver are rallying and market justifiably fears the Norges Bank will climb down from its normalization policy, especially now that oil prices are perched near the lows for the year.

Upcoming Economic Calendar Highlights (all times GMT)

• 0830 – UK Jul. Jobless Claims Change
• 0830 – UK Jun. ILO Unemployment Rate
• 0830 – UK Jun. Average Weekly Earnings
• 0900 – Germany Aug. ZEW Survey
• 1000 - US Jul.  NFIB Small Business Optimism
• 1230 – US Jul. CPI
• 1230 – US Jul. Real Average Hourly Earnings
• 1500 – US NY Fed to release Q2 household debt and  credit report
• 0030 – Australia Aug. Westpac Consumer Confidence
• 0130 – Australia Q2 Wage Price Index
• 0200 – China Jul. Industrial Production