FX Update: EURUSD breaks 1.1000

The G-10 rundown

USD – the USD upside continues until the Fed finally decides to go big enough to get ahead of the curve – the move needed to get ahead of the curve increases in proportion with global risk sentiment. A forceful move from the Trump administration is the only other option that can move the needle. So far, Trump has been all tweet and no intervention on currency policy.

EUR – the actual break of 1.1000 may have been the market merely playing catchup with USD action elsewhere and the psychological (and actual) barrier that 1.1000 provides. The risk here is that the market is complacent about downside, assuming that this break will prove like the prior four and not immediately lead to a further slide – so if the price action sticks lower, traders and hedgers may have to rush in on a fear of having missed the move.

JPY – a very passive performance from the yen here, and likely needs broad risk off to match the US dollar in strength. The BoJ’s reduction of bond purchases to slow the decline of yields is yen-supportive as well here.

GBP – sterling will have a hard time sustaining a break down through 0.9000 unless both the outlines of Brexit become clearer (and not too hard) and that elections won’t results in a “Corbyn revolution”.

CHF – low yields and weak Euro keeping EURCHF trading heavily – note that the USDCHF resurgence on USD strength approaching key resistance (local highs and 200-day moving average around 0.9950) that could drive flow on a break.

AUD – a minority looking for an RBA cut tonight and if not, at the October meeting. The GDP print on Wednesday looks possibly more interesting for driving flow.

CAD - Canada’s Q2 GDP print surprised strongly at the headline, but this was heavily trade driven and other measures are cause for concern, particularly the weakest consumption in some seven years. We still see the risk that the Bank of Canada tilts more to the dovish side than currently priced and USDCAD technically interesting on an upside break.

NZD – the kiwi struggling for air and we keep an upside AUDNZD view with significant short term volatility risk this week over key Australia event risks.

SEK – Sweden is tilting toward a recession with a negative policy rate – not much to like except valuation is very cheap and any fiscal signals would likely prove a positive catalyst – especially from Sweden, but also from the EU.

NOK – positive mood in markets and focus on EUR weakness sees EURNOK pulled back to the key 10.00 area.

Upcoming Economic Calendar Highlights (all times GMT)

• US Market Closed  for Labor Day
• 0715-0800 – Euro Zone Aug. Manufacturing PMI
• 0830 – UK Aug. Manufacturing PMI