The G-10 and CNH rundown
USD – the case for USD weakness is compelling, with the caveats noted above. Powell out speaking late today as well, although the Fed wants a look at a fully un-locked down economy in all likelihood, before considering any guidance change.
CNH – the renminbi poised at the top of the cycle against the US dollar as markets set to be closed or the next week in China. Interesting to note recently that the official renminbi basket has been allowed to strengthen beyond the top of the range established since mid-2018.
EUR- if recent patterns hold – the euro strong within G3 context, but not compelling as a pro-cyclical currency otherwise.
JPY – the key USDJPY pair has staged an impressive reversal, but isolated JPY strength is more likely with weak commodities, rising credit spreads, wilting risk sentiment – pretty much the opposite of what we have right now.
GBP – sterling spent a couple of days consolidating after the big move on the BoE last Thursday, which sidelined any thoughts of negative rates for now – we are constructive on the currency’s ability to trend higher versus the EUR and the weak USD seeing GBPUSD bounding higher as well – 1.4375 is the next major range resistance there.
CHF – the areas of interest in EURCHF are below 1.0750 and above 1.0900.
AUD – the Aussie enjoying a resurgence in key commodities prices of late – particularly iron ore in recent days and is the high beta trade, perhaps, within the G10 to the reflation/risk-on trade.
CAD – oil supportive and so is the strength of the US economy, but UDSCAD has been awfully boring and range bound for two months – need to take out the cycle lows for the US dollar to see fresh momentum here.
NZD – the kiwi on its back foot as the market has bigger eyes for AUD and the big renewed jump in metals prices. AUDNZD a bit Ziggy zaggy and needs a new close north of 1.0800 to take the focus back higher, but as long as market retains a hopeful outlook, would expect AUD to outperform at the margin.
SEK – the Riksbank today promises zero rates for years to come – no surprise there. The Riksbank’s obsession is inflation and ensuring it is high enough – so higher inflation ratings in EU and elsewhere will generally prove SEK supportive, as will continue strong risk sentiment. A bit disappointing to seek EURSEK pulling back higher after test below 10.05 today – but have to believe that the huge psychological 10.00 level comes under fire soon if conditions remains as SEK supportive as they have in recent months.
NOK – Norway prints an interesting 2.4% spike for the year-on-year reading, and 2.7% for the core reading. The biggest jumps were in “furnishings, household equipment and routine maintenance” and in the broader “consumer goods” category, although “services where labor dominates” were also up – is that down to inefficiencies and costs due to pandemic measures?. The fundamental implications are quite negative for NOK if inflation continues higher on the negative real rate implications, but not sure the market has its eye on the ball as long as oil prices are gunning higher.
Upcoming Economic Calendar Highlights (all times GMT)
- 1300 – ECB President Lagarde to speak
- 1330 – US Jan. CPI
- 1530 – US Weekly DoE Crude Oil and Product Inventories
- 1630 – Canada Bank of Canada Deputy Governor Lane to speak
- 1700 – UK Bank of England’s Bailey to speak
- 1900 – US Fed Chair Powell to Speak to the Economic Club of New York
- 0001 – UK Jan. RICS House Price Balance