FX Update: The return of Tariff Man sees USD lower

The G-10 rundown

USD – after so much quiet of late, it is tempting to see yesterday’s action as a watershed moment, but we need a determined follow through lower in the greenback – regardless of the US data mix through the rest of the week, for a better confirmation that something larger is afoot.

EUR – the 1.1000 level in EURUSD has held very well after two recent tests – clear from all of the noise of late, including Lagarde’s speech yesterday, that  Euro Zone gearing up for a major climate policy push that will inevitably include a fiscal stimulus element – could this be financed in the form of super-national EUR climate bonds? EURUSD needs to clear the 1.1180 hurdle before we can start discussing notable technical developments.

JPY – the yen reacting strongly to risk off is the usual no-brainer, but perhaps more  interesting is the spike in JGB yields at the long end, with the 10-year nearly reaching 0% overnight after the weak auction overnight. Japan is also warming up a fiscal stimulus – JPY supportive and an interesting turn in USDJPY overnight – will this one punch lower unlike the prior treacherous one?

GBP – a spectacularly weak BRC like-for-like survey overnight,  but market only has eyes for smooth Brexit prospects and the boost to sentiment and capital inflows this will provide, as well as perhaps the idea that a weak economy improves Boris Johnson’s chances and increases the vigor of his eventual fiscal outlays.

CHF – USDCHF did not tarry above parity – if risk off fails to stick and bond yields head higher, would suspect EURCHF remains supported.

AUD – a very strong Aussie has to be taken at face value on the upbeat RBA – but how will the market absorb a more profound risk off move across markets, the US tariffs against China going into effect on December 15, etc.?

CAD – the loonie could prove weaker in the crosses if US data continues to come in weak – note AUDCAD technical situation ahead of the heavy load of US data through the end of this week and the Bank of Canada meeting tomorrow.

NZD – AUDNZD trying to turn the corner overnight, but a lot of wood to chop to turn the tide in the bulls’ favour there – note RBNZ Governor Orr out again late today.

SEK – a stronger Euro is supportive of an even stronger SEK, and rather impressive to see EURSEK heavy again after yesterday’s miserably weak Swedish PMI. The rise of the anti-immigration Sweden Democrats in the polls (polling as the largest party in Sweden at times lately) could encourage the sitting government into a more activist stance on the fiscal side.

NOK – EURNOK stuck mid-range, awaiting signals from the global economy and oil prices – we NOK firmer eventually, but seasonality is a head wind for NOK bulls until January.

Today’s Economic Calendar Highlights (all times GMT)

• 0930 – South Africa Q3 GDP
• 0930 – UK Nov. Construction PMI
• 1330 – Riksbank’s Jansson to Speak
• 1600 – New Zealand QV House Prices
• 1910 – New Zealand RBNZ’s Orr to Speak
• 0030 – Australia Q3 GDP