The G-10 rundown
USD – the greenback outpaced marginally by the JPY but strength showed clear broadening against smaller G10 and EM currencies on this latest whiff of risk off. Watch out for Trump railing against the new highs in the USD at some point if the equities falter more than a percent or two.
EUR – the euro weak versus traditional safe havens and the US dollar here, but may fail to lead the race to the bottom if broader risk sentiment weakens further as the smaller currencies should prove more vulnerable in such conditions.
JPY – the yen should continued strength here, broadly speaking, as long as the bid for safe haven bonds persists. The strength could pick-up more forcefully as the long US T-bond threatens the cycle lows in yields. EURJPY back in play to the downside on further drops in bond yields.
GBP – the recent sterling recovery and hopes for generous fiscal outlays when the (likely delayed) UK budget is announced next month may not sit well with a retrenchment in risk appetite – but still prefer to remain constructive on sterling in EURGBP
CHF – EURCHF close to the lows for the cycle and seems to find downside as the default direction regardless of the backdrop – 1.0500 may be the next psychological target for bears.
AUD – the Aussie looking weak and ready for new cycle lows in AUDUSD and elsewhere (consider AUDJPY shorts, for example) on the market’s possibly insufficient pricing in of more widespread fall-out to the outlook from the coronavirus outbreak, not to mention Australia’s existing vulnerabilities from its domestic credit cycle.
CAD – the USDCAD consolidation has proven orderly and shallow, keeping bulls in the driver’s seat, though we need to take out the heavy overhead resistance from 1.3300-1.3350 to get the trending ball rolling.
NZD – the kiwi outpacing the Aussie overnight, likely on the Australian economy’s greater sensitivity to the outlook for China, but the overnight in NZDUSD should embolden the bears there.
SEK – the volatile Swedish Unemployment Rate series just outdid itself this morning with a 7.5% print after , although the seasonally adjusted figure was 7.1% vs. 6.9% expected (and 6.6% last month).Given the backdrop of weaker sentiment, the market defaulted to selling SEK, but EURSEK only threatens a reversal if it trades well back above 10.60.
NOK – ugly shift overnight in risk sentiment and EURNOK pulled hard away from the key 10.00 level – the obvious downside catalyst – which underlines risk of test of highs and beyond if we finally see some retrenchment in risk.
Upcoming Economic Calendar Highlights (all times GMT)
- 0930 – UK Jan. Jobless Claims Change
- 0930 – UK Dec. Average Weekly Earnings
- 0930 – UK Dec. Employment Change/Unemp. Rate
- 1000 – Germany Feb. ZEW Survey
- 1330 – Canada Dec. Manufacturing Sales
- 1330 – US Feb. Empire Manufacturing
- 1500 – US Feb. NAHB Housing Markt Index
- 2215 – New Zealand RBNZ Governor Orr
- 2350 – Japan Jan. Exports/Imports