USD rally pauses, sterling slide continues

Elsewhere, the Hungarian central bank announces rates today. The bank hasn’t moved the policy rate since executing its final cut to the current 0.90% level back in early 2016. The bank is not expected to make a policy shift at this meeting, but the situation is far more interesting here for the bank than it has been in a very long time, given EURHUF’s rise to the top of a multi-year range in the 315-320 area.

Interesting to watch the degree of contagion into CEE from the recent EU woes given the clear political divide. Germany-Hungary 10-year yields have widened back to levels from last fall after trading 100 bps tighter than they are at present near the start of this year.
 
The G-10 rundown

USD – likely key to see US rates picking back up before the 10-year benchmark threatens the pivotal 3.00% area to continue to support a USD rally. Federal Open Market Committee minutes up tomorrow could be the next event risk test for the rally.

EUR – watching peripheral spreads and headline risks from Italy as the populist government appears to have its prime minister (an unknown quantity). US futures positioning reports suggest a very tardy response to the situation in Europe, as the speculative long position has remained very large (as of last Tuesday when the latest weekly report was generated) through the large correction in EURUSD.

JPY – the JPY likely to stay weak if US yields rise again with no collateral damage to risk appetite. The picture gets more confusing for JPY traders if rates are up and risk is down. Surprised that EURJPY hasn’t suffered more through this recent episode of EU existential worries...

GBP – sterling remains in the doghouse, even lower yesterday against the euro as the next round of Brexit talks is set to get under way today. As noted above, the UK data calendar is rather heavy through the rest of the week as well.

CHF – EURCHF clearly absorbing some safe-haven flows as EU peripheral spreads have widened and could continue to act as the proxy of EU existential pain once again, though the SNB may be happy to step in at any time.

AUD – Aussie has been the strongest currency in the G10 over the last two weeks – hard to believe this is set to continue without a more compelling catalyst.

CAD – oil prices still near the highs perhaps helping to steer USDCAD back lower after the reaction to weak Canada data on Friday. 1.2700-50 area is the key tactical pivot for the very directionless USDCAD chart.

NZD – low expectations for the kiwi relative to global peers – but major weakness might require a specific data or central bank catalyst or an ugly decline in risk appetite.

SEK – SEK achieves a new leg of strength versus the struggling single currency and EURSEK could be set for a test of the ultimate structural pivot area into 10.00.

NOK – EURNOK finally having a look at the key downside break area below 9.50 – surely NOK can managed a decent leg up against the single currency here as long as risk appetite is stable and oil prices highs amidst all of the EU existential pain?
 
Upcoming Economic Calendar Highlights (all times GMT)

   • 0730 – Sweden Apr. Unemployment Rate
   • 0815 – UK Bank of England’s Carney and others speak
   • 1200 – Hungary Rate Announcement
   • 1400 – US May Richmond Fed Manufacturing