Trump tariff threat sparks global risk off

The G-10 rundown

USD – the US dollar looks to remain firm as long as this bout of weak risk appetite continues, though the JPY could outperform and the focus could be more on less liquid currencies’ weakness rather than pairings against a more liquid currency like the euro.

EUR – a test of the 1.1500 area and possibly a bit more looks in the cards, though an aggravation of the current risk off could ease some of the focus on the weak EUR (note the euro’s performance against the G10 smalls over the last couple of sessions.) Merkel has two weeks to sort her coalition partner out and has called for an EU summit on immigration.

JPY – the yen is making a statement like it hasn’t done in some time and this fits well with its normal tendencies to do well in violent fits of safe haven seeking. Note the likes of an AUDJPY poking towards big chart levels on the downside this morning. This could get ugly as we have yet to see a more profound bout of risk off.

GBP – sterling has nothing positive to say in this environment and the Bank of England is hardly likely to wax hawkish relative to expectations in this backdrop. GBPUSD is poking at the lows of the cycle this morning.

CHF – the Swiss franc is proving its old safe haven status, boosted in particular this week by the threat to Merkel’s leadership in Germany. The 1.1400 level in EURCHF looks pivotal and the Swiss National Bank could feel under siege this Thursday and not want to send any signals on eventual policy normalisation.

AUD – no mercy for the Aussie as trade wars and an intensifying weakness in Chinese markets and Asian EM, as well as key commodities prices, has seen the AUD singled out. 

CAD – the CAD is firmer than the more China-exposed AUD, but USDCAD has recently broken well free of the 1.30-1.31 zone and could look much higher here, particularly if oil ends the week on a sour note over the OPEC meeting outcome (although “NOPEC” also meets Saturday, so early next week is the critical phase for oil).

NZD – the focus has been more on AUD, but the little NZD can hardly expect to avoid a negative focus in this environment and NZDUSD could be in for a significant drubbing if the May lows towards 0.6850 are taken out.

SEK – EURSEK has thoroughly rejected the downside and SEK will likely continue to suffer as an illiquid currency with a punishing policy rate and an economy highly leveraged to exports, particularly into the increasingly wobbly EU.

NOK – weak oil prices and risk off are not the stuff of NOK upside as EURNOK looks in danger of creeping back up into the higher range if the risk backdrop remains unsupportive and the Norges Bank doesn’t shift expectations sharply higher.

Upcoming Economic Calendar Highlights (all times GMT)

0730 – Sweden May Unemployment Rate
0800 – Euro Zone Apr. Current Account
0800 – ECB’s Draghi to Speak at Sintra
0900 – Bank of Russia’s Nabiullina to speak
1200 – Hungary Central Bank Rate Decision
1230 – US May Housing Starts and Building Permits
2350 – Japan Bank of Japan Meeting Minutes