FX Update: ECB wrap, sterling eyes flash PMIs

The G-10 rundown

USD – the US dollar is edging stronger again more broadly after the reaction to the UK PMI’s, though still not making waves against EM yet – Fed outlook needs a jolt for more notable USD directional move.

EUR – the signaling from ECB President Lagarde yesterday disappointing the market if we only end with a nudge of the ECB’s inflation targeting language at the end of this year’s policy overhaul. Will be on the lookout, however, for hints that the policy review is focusing on the deleterious effect of maintaining negative rates over the longer term. Otherwise, fiscal policy signals, if any, would be a key catalyst.

JPY – the yen failing to get a bid from the coronavirus issue and looks a bit adrift, though if we look at the crosses a bit interesting to note the EURJPY deepening its recent reversal – that may continue and accelerate as long as safe haven fixed income is bid and especially if the market rediscovers the concept of risk off.

GBP – sterling was strongly bid earlier on the flash PMI release but not following through higher and in fact reversing the initial move – a tactical disappointment.

CHF – EURCHF continues to look heavy and the next area of interest is down below 1.0650 as the ECB review didn’t spark buying interest for the EUR.

AUD – some weakness late yesterday and in the crosses could be mild transmission into AUD from the coronavirus and a weaker commodity complex

CAD – USDCAD settling lower after the heavy CAD selling in the wake of a dovish turn from the BoC on Wednesday – still prefer looking higher for the pair as long as 1.3100 area supports. Canada Nov. Retail Sales release up later today.

NZD – kiwi boosted on higher CPI figures, though we note a lack of reaction in NZ rates and question how much strength this can drive as AUDNZD approaches the assumed “absolute potential “ in the 1.0300 to parity area.

SEK – the krona rather inert and interesting to see zero transmission from ECB meeting yesterday – global/EU growth outlook and fiscal policy catalysts may be the only factor that can spark upside SEK interest (or dramatic risk off, historically SEK negative).

NOK – short Norwegian rates continue to slide after the Norges Bank yesterday fretted signs of a weakening domestic economy while waxing hopeful on the global outlook. Would expect EURNOK to pressuring on 10.00 if oil slides much further on a pickup in coronavirus concerns, for example.

Today’s Economic Calendar Highlights (all times GMT)

• 1330 – Canada Nov. Retail Sales
• 1445 – US Markit Flash PMI