FX Update: A big acceleration towards what?

The G-10 and USDCNH rundown

USD – you would think that the USD would fall as a function of even more aggressive pricing of negative real yields as anticipated US stimulus is seen driving inflation farther and farther above the policy rate and even the yield curve, but real yields have actually picked up notably in the US recently. For now, will take the weak USD as the flip-side of the enthusiasm for commodities and if global holders of treasuries are shedding their allocations, this could also be weighing on the greenback. Whether the very scary scenario I outlined last week of falling risk appetite, a falling USD and rising US treasury yields engages is now an open question.

CNH – the CNY staying quiet within the range established in USDCNY since the beginning of the year, and Chines equity markets corrected badly recently. Certainly suggests China would like to lean against strength here.

EUR – as noted above, breaking higher in EURUSD even if the Euro is rather weak against the commodity super-stars of the moment. Little to get excited about in Europe.

JPY – the JPY is in a remarkable downward spiral and will likely only find support (probably in climactic fashion) if we finally see a reversal in the commodities up/bonds down trade that has been raging for about a month now.

GBP – sterling finally consolidating after its strong run of late. Next Wednesday sees Chancellor Sunak announcing the Spring Budget at which he may choose to announce the eventual intent to hike corporate taxes as well as a huge new £100 billion stimulus.

CHF – if the backdrop of rising yields and commodity prices extends here, the EURCHF move could extend as high as 1.1200-1.1250, but move looks aggressive if EU yields stay capped or ECB weighs in again on that issue (after ECB comments earlier this week).

AUD – AUDUSD touched 0.8000 this morning for first time since 2018 – next chart point is the 0.8135 area high from back then – but watching iron ore prices more than copper prices as a coincident indicator for the Aussie.

CAD – USDCAD breaks the 1.2500 level for first time since early 2018 on the latest surge in oil prices. Canadian yields have moved aggressively at the longer end of the curve and BoC Governor Macklem saw “early signs“ of an overheating housing market earlier this week.

NZD –  the kiwi is the strongest performer this week by a long shot and will prove very high beta to any shift in the backdrop. Trade data, consumer confidence survey and RBNZ’s Orr up tonight from New Zealand – another week of action like this will have Orr under pressure to verbally intervene.

SEK – the krona not standing out as there is no commodity angle – watching the magic 10.000 level in EURSEK – higher inflation and stable or better risk appetite allow SEK to run higher.

NOK – new highs for crude oil see NOKSEK snapping to attention again – big resistance line coming up there – USDNOK hit new lows this morning as oil prices dominate the focus.

Upcoming Economic Calendar Highlights (all times GMT)

• 1000 – Euro Zone Consumer Confidence and other Confidence surveys
• 1045 – ECB Chief Economist Lane to speak
• 1330 – US Jan. Durable Goods Orders
• 1330 – US Weekly Initial Jobless Claims and Continuing Claims
• 1330 – US Q4 GDP revision
• 1430 – US Fed’s George (non-voter) to speak
• 1500 – ECB Vice President Guindos to speak
• 1530 – US Fed’s Bullard (non-voter) to speak
• 2000 – US Fed’s Williams (voter) speaking
• 2100 – New Zealand Feb. ANZ Consumer Confidence
• 2330 – New Zealand RBNZ Governor Orr speaking
• 2350 – Japan Jan. Industrial Production / Jan. Retail Sales