FX Update: NZD dumps on dovish RBNZ. NOK pumps on big stimulus

The G-10 rundown

USD – the dollar firming again after stumbling yesterday for no obvious reason against the euro – but still need a bigger impulse from the greenback either way as it has merely coiled and coiled in a range. Powell a possible catalyst in addition to risk sentiment today.

EUR – the euro looking lower again after yesterday’s oddball rally – some of that EURGBP driven? Simply don’t understand the recent back-up in EURJPY and curious if the bears there get things back on track if risk sentiment stumbles further.

JPY – a strong support for the yen from both equity softness and strength in US treasuries yesterday with another test on the latter in today’s T-bond auction – would expect strength there. Yen upside in the crosses preferred if safe haven seeking in evidence as both USD and JPY likely to strengthen with that backdrop.

GBP – sterling on the defensive and don’t see major catalysts for upside potential until or unless we see some hard evidence that the post-Covid19 recovery is on track and is exceeding expectations. That looks a long way from here – for now focusing on the technical catalyst noted above on the GBPUSD chart.

CHF – no pulse in EURCHF as 1.0500 is the apparent floor for the SNB at the moment.

AUD – employment data dead ahead, with interpretation of the numbers made difficult by the government’s “JobKeeper” scheme, which keeps millions in Australia nominally on employers’ payrolls even as they are not working and the government is paying them a salary. Still interesting to see the spin around the official numbers and how the market reacts.

CAD – CAD has been escaping much notice, but longer term crude oil prices still remain in the dumps, not pricing a strong recovery and tomorrow sees a major Bank of Canada financial review – room for dovish surprises there – but want to see a technical move in USDCAD higher to provide a trading hook.

NZD – this latest RBNZ meeting seals the deal for NZD bears as the central bank clearly wants to go to negative rates and keeps us looking lower for NZD versus AUD and the USD and even JPY for variety.

SEK the Swedish krona headed nowhere in a hurry after the EURSEK has done the heavy lifting in providing what appears a major market top until proven otherwise. That still leaves plenty of room for a throwback SEK sell-off of some magnitude if concerns about the shape of the recovery develop in the near term.

NOK – the most interesting test from here for NOK is whether the weight of this stimulus announcement is of sufficient magnitude to offset headwinds from any new sell-off in risk appetite and/or crude oil. Regardless, the big stimulus announced yesterday does help provide a backstop for the currency.

Upcoming Economic Calendar Highlights (all times GMT)

• 1100 – ECB’s Lane to Speak
• 1200 – Hungary Central Bank Meeting Minutes
• 1230 – US Apr. PPI
• 1300 – US Fed Chair Jay Powell to Speak
• 1700 – US Treasury 30-year T-Bond auction
• 2010 – New Zealand RBNZ Governor Orr before parliament committee
• 2301 – UK Apr. RICS House Price Balance
• 0130 – Australia Apr. Employment Change / Unemployment Rate